California Law Creates New Liability Headaches for Hiring Port Truckers

On Sep. 22, 2018, California Governor Jerry Brown signed a bill into law that will create new liabilities for 3PLs working with port drayage motor carriers in California.  Beginning Jan. 1, 2019, California SB 1402 will make customers of port drayage motor carriers jointly and severally liable alongside port drayage motor carriers who have unsatisfied judgments regarding unpaid wages, damages, expenses, penalties, and workers’ compensation liability.

Specifically, the bill:

1. Requires the Division of Labor Standards Enforcement (DLSE) to post on its website a list of port drayage carriers, or their successors, with outstanding judgments for wage violations and other labor law violations.
2. Makes any customer using the service of a carrier on the DLSE list jointly and severally liable for unpaid wages and other damages or penalties, as specified. The customer’s liability will be determined either by DLSE or by a court in a civil action brought by DLSE or a commercial driver.
3. Provides exceptions for when a customer is jointly and severally liable, such as when employees are covered by a collective bargaining agreement or when a customer and a carrier have an existing contract at the time the carrier is listed on the DLSE website and the customer wishes to terminate the agreement within 90 days of the listing.

Transportation intermediaries such as property brokers, freight forwarders, non-vessel operating common carriers, and others will all have liability exposure if they have selected a motor carrier that is listed on the DLSE’s website. Opponents of the bill state that this is simply an attempt to unionize truckers, noting that that there is an exemption to joint liability for retailers who hire union trucking firms.

This new state regulation comes on the heels of an April 2018 California Supreme Court decision in the case of Dynamex Operations West, Inc. v. Superior Court of Log Angeles where the Court reinterpreted the test for determining whether workers should be classified as independent contractors or employees. In Dynamex, the California Supreme Court embraced a standard that presumes that all workers are employees instead of independent contractors. This presumption will change the nature of the debate on port trucker classification and force all companies to carefully reexamine their worker classification decisions and business relationships.

Employee classification is a critical issue for every TIA member. TIA staff will closely monitor all developments related to SB 1402, the Dynamex decision, and new regulations and legal decisions nationwide. For additional information, please contact TIA Advocacy at advocacy@tianet.org or 703-299-5700.