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Mar.7, 2016

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SURFACE & DOMESTIC TRANSPORTATION www.joc.com THE JOURNAL OF COMMERCE 99 PUTTING THE "Y'll" IN GLOBAL COMMERCE. Alb Stte Port Authority www.asdd.com THE PORT OF MOBILE Teamsters view consolidation as large-scale mergers and acquisitions until a much smaller population of well-funded companies with employee drivers controls drayage in a region, ensuring sufficient capacity for shippers, good pay and benefits for drivers and profits for the trucking companies. Hub, which did not return phone calls, could not compete in the Southern Califor- nia market after less than two years under the employee model. Facing misclassification pressures in 2014, and sensing that the regu- latory environment in California was against the independent-contract model, Hub shifted to employee drivers. By pricing its services aggressively to gain market share, however, Hub wasn't able to pay its drivers competitive wages. The result was a "downward spiral" in which the company had no choice but to exit the market, Weiner said. About 30 trucking companies in the region have shifted to the employee model in the past several years, and the Teamsters union has organized four of them, with a total of about 500 drivers, Weiner said. The employee-based model is decidedly more costly, Stefflre said. He cited a study by Southern California economist John Husing that concluded that with employee drivers, "the cost of labor would rise by a 2.08 fac- tor, while the work hours would decrease by 2.63 percent in order to comply with Califor- nia labor laws." Conversations with local trucking exec- utives indicate that a unionized driver in Los Angeles-Long Beach will earn about $20 to $22 an hour, with benefits of $21 to $23 an hour, for a total cost to the employer of $41 to $45 an hour. Owner-operator drivers are paid by the trip; downtime resulting from congestion or long terminal waits translates to reduced earnings. In short, tensions between the employee and independent-contractor models in dray- age will continue. This is especially true in California because of the regulatory envi- ronment and spate of misclassification lawsuits. JOC Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo.

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