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By Cecile Entleitner, Senior Associate,
Blakey & Agnew
Dating back to the labor movement of the late 19th century, the Labor Day holiday serves as an annual celebration of America’s workers. While Labor Day festivities have changed over the years, its origins in labor disputes remain relevant today. This has been particularly evident in recent developments within the freight transportation industry, with nearly every sector facing challenging labor negotiations, litigation, or controversial new regulations.
After a lengthy but unsuccessful mediation effort in the rail industry, President Biden in July established a three-member Presidential Emergency Board (PEB) to investigate the dispute and issue non-binding recommendations to reach an agreement between the railroads and rail labor unions. These recommendations were released in mid-August, triggering a 30-day deadline for the parties to reach a settlement. The PEB’s recommendations for the five-year agreement included a retroactive annual wage increase for rail workers of 3 percent for 2020 and 3.5 percent for 2021; an annual wage increase between 4 percent and 7 percent through 2024; and a $1,000 annual bonus for 2020 through 2024.
Five of the 12 rail unions – representing approximately 27,000 of the 115,000 unionized workers involved in the negotiations – have since reached tentative agreements consistent with the PEB’s recommendations. The two largest unions, the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal, Air, Rail, and Transportation Workers’ Transportation Division, remain at the bargaining table.
If the remaining unions do not reach an agreement with the railroads by September 16 or mutually decide to extend negotiations, workers would then legally be allowed to strike while railroads may replace or lock out workers. Congress could halt any potential strike by imposing a binding third-party settlement – it last intervened in 1991, ending a national rail strike within 24 hours.
Similarly, West Coast port workers represented by the International Longshore and Warehouse Union have been engaged in labor contract negotiations of their own to reach an agreement with the Pacific Maritime Association, which represents 70 terminal operators and ocean carriers. Although their previous agreement expired in July, discussions are still ongoing. However, both parties have indicated their intent to maintain operations throughout the negotiations without resorting to a strike or lockout. One of the major points of contention that remains unresolved is the use of automation at port facilities. Terminal operators and ocean carriers argue these technologies are needed to increase efficiency and maintain competitiveness. Dock workers, on the other hand, fear additional automation will reduce available jobs and could actually decrease productivity due to mechanical failures and other technical difficulties.
If the stalemate results in a strike or lockout that constitutes a national emergency, the President can invoke the Taft-Hartley Act. The measure imposes an 80-day “cooling-off period” during which strikes and lockouts are prohibited. The Act was last invoked by President Bush in 2002 after West Coast ports shut down for 10 days due to a lockout.
In the trucking industry, the most significant recent
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labor disputes have centered around worker classification; whether a truck driver should be considered an employee or an independent contractor. A 2018 decision by the California Supreme Court established a new, three-pronged classification test in the state, known as the ABC test. While all three prongs must be satisfied to classify a worker as an independent contractor, the B prong has been the most challenging for proponents of the independent contractor model as it requires the worker to perform work that is “outside the usual course of the hiring entity’s business.” The ruling was codified into California state law in 2019.
The law, Assembly Bill 5 (AB 5), was quickly challenged in a suit filed by the California Trucking Association (CTA) – arguing that AB 5 is preempted by the Federal Aviation Administration Authorization Act, which prohibits states from implementing laws that affect the prices, routes, or services of motor carriers. Due to CTA’s pending case, an injunction was issued temporarily exempting the trucking industry from AB 5 enforcement. While the injunction was overturned by an appellate court in 2021, it remained in place as CTA petitioned the U.S. Supreme Court for review. In June 2022, CTA’s petition for review was denied – as a result, the case was handed back to a lower court with a mandate to dissolve the injunction. The injunction was formally lifted in late August, allowing AB 5 to take effect. However, CTA’s original case challenging the state worker classification law remains pending.
The implementation of AB 5 will have significant impacts for motor carriers and drivers in California, particularly for the drayage industry where over 70 percent of drivers currently operate as independent contractors. It also has the potential for more widespread effects if other states choose to enact similar legislation. Carriers and drivers must now evaluate several options to comply with AB 5, such as shifting fully to an employee driver model, operating as a brokerage to satisfy the ABC test’s B prong, or relocating to a different state to continue under an independent contractor model.
CTA and other trucking groups assert that these changes will negatively impact current supply chain strains, interstate commerce, and inflation. Some stakeholders have expressed concern that it could further exacerbate California’s driver shortage as drivers who do not wish to be classified as employees may leave the state or retire. Proponents of AB 5, including the Teamsters union, hailed the Supreme Court’s denial of CTA’s petition as a victory for workers. The Teamsters, who intervened as a co-defendant in CTA’s case against the state of California, contend the law will prevent the misclassification of truck drivers and guarantee drivers receive employment protections, such as the right to unionize, access to benefits, and higher wages.
Blakey & Agnew, LLC is a public affairs and
communications consulting firm based in
Washington, DC.
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