California continues to make plenty of freight-related news, with movement on multiple fronts in regards to truck regulations and continued labor unrest at key ports. On the trucking side, the previously reported AB5 rule that would affect independent owner-operators continues to make its way through legal challenges. And new regulations targeting diesel-powered trucks are moving forward. While at the ports in California and along the rest of the west coast - more than 10 months after their previous labor contract expired, dockworkers are still looking for a new one. We'll tackle each topic in a bit more depth below.
AB5 "Gig Worker" Rule Faces Legal Challenges
The AB5 - also known as the "gig worker" or independent contractor - rule has technically been in effect for some time with nebulous enforcement. But all along, both members of the trucking community and some gig workers have been pushing back against it. To recap, the rule says that if a worker doesn't pass strict criteria, they may not classify as an independent contractor and would thus need to be an employee of a carrier - and be afforded associated benefits. Those against it - including many independent dray truckers - want to maintain their independence rather than work for a large carrier.
AB5 was signed into law in 2020 and the U.S. Supreme Court declined to reinstate an injunction relating to a California Trucking Association (CTA) challenge last summer, suggesting it would fully take effect. But again, enforcement has been uncertain, and legal challenges - including the CTA's which was initially filed in 2019 - are moving forward. The CTA challenge also includes another plaintiff - the Owner-Operator Independent Drivers Association - while the other ongoing challenge includes Uber, Postmates and two of their drivers.
And that second case recently received a ruling by an appeals court sending it back to a lower court that initially ruled against the challenge. The 9th Circuit Court of Appeals unanimously agreed with the argument that the plaintiffs may have been denied equal protection under the federal Clause - as a key sponsor of the bill had been quoted as being open to changes and additional exemptions, "but not for app-based ride hailing and delivery giants."
Because that case now has new life, the ruling also means plaintiffs in the trucking challenge are looking to incorporate the Equal Protection argument as well. As such, the attorneys in that case jointly asked for more time to file their initial or additional briefs in late March - ahead of an initial filing deadline. The trucking case is back in front of the judge who originally granted the injunction, while the Uber/Postmates case is back in front of the judge who originally denied all their challenges. At any rate, the continued uncertainty and the law itself uncertainty were recently cited by supply chain pros as a reason some freight activity has moved away from West Coast ports.
Ongoing Labor Issues at West Coast Ports Remain...Ongoing
Labor issues that began in the leadup to the end of the last contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have yet to subside at major West Coast ports - including the busiest ones: the Port of Los Angeles and the Port of Long Beach. That's because in spite of the latest labor contract for dockworkers expiring last July, a new one is still not in place. In fact, just Friday, the aforementioned California ports had to close, due to staffing shortages. Depending on who you talk to, the lack of workers was either because of a coordinated union effort (says the PMA) or because of Good Friday observances following a Thursday night membership meeting (ILWU).
While the ports were back up and running Saturday, the incident - and the rival explanations - illustrate the still fragile state of the relationship between dockworkers and those in charge. The Biden Administration has continued to work with both sides to facilitate a new contract, and there has been some recent progress as the parties said they reached a tentative agreement resolving some ongoing sticking points. Both the ILWU and PMA have said they are committed to resolving negotiations quickly. However, that was before Friday's latest complication. And in the meantime, many have shifted shipping activity to the East Coast due to the labor uncertainty, the previously noted AB5 situation and another set of questions surrounding diesel trucks in California.
California Plan to Phase Out Diesel Trucks Can Go Forward
The EPA late last month agreed that California can set its own regulations that would hasten the transition from diesel to electric trucks in the state. Those already announced regulations require manufacturers to sell (and thus carriers to buy) an increasing percentage of all-electric trucks starting next year. By 2035, sales of some truck classes will need to be 75% electric. While any trucking rules have direct effects on supply chains, an even more imminent impact comes with the requirement that only zero-emission trucks will be allowed to be added to the register for drayage trucks serving California's ports starting January 1.
It's settled fact that freight transport is a major contributor to carbon emissions, and the industry has made moves to reduce the environmental impacts of trucks, trains, planes and container ships through combinations of regulatory requirements and proactive efforts. But many are concerned with the timeline of California's truck standards (especially at the ports), citing both the lack of electric truck availability and the lack of charging infrastructure. According to experts, 1,500 to 2,000 drayage trucks are retired and replaced at California ports each year, meaning that number of zero-emissions trucks would need to be added to the register in 2024.
Yet as of now, there are only two public charging stations for heavy-duty electric trucks in Southern California - compared to 2,500 commercial diesel stations. With that near-term concern is the longer-term worry about the more widespread dearth of charging stations that would become an increasing problem with more trucks needing electricity. And even with more places to charge, California in particular has had issues with its power grid that could be exacerbated by heavier electricity demand due to more EVs.
More broadly, some say there simply aren't enough options for electric trucks out there today, and it may take more time than these regulations allow for enough inventory to hit the streets. But regardless of timing, changes are coming, as California Governor Gavin Newsom's office has indicated eight other states including New York and New Jersey will follow their lead. And the EPA continues to increase pollution standards for heavy trucks, with the agency indicating an expectation that most domestic freight will travel via electric and hydrogen fuel cell trucks in the not-too-distant future.
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