What’s Happening?: Potential Joint Liability for Drayage Carrier Customers

California retailers and shippers beware. In another move by California lawmakers to deter companies from classifying truck drivers as independent contractors, Senate Bill 1402 (SB 1402), entitled “Dignity in the Driver’s Seat,” was introduced into the California Senate in April, 2018. The bill seeks to discourage labor and employment abuses by port drayage motor carriers by making retailers jointly liable for violations of state labor and employment laws when they hire port drayage motor carriers with unpaid final judgments for misclassifying workers, not providing worker’s compensation insurance, and other violations.

Should SB 1402 add Section 2810.4 to the California Labor Code, retailers who hire these port drayage motor carriers would be jointly liable for any future labor and employment law violations. SB 1402 contains an exception to joint liability for retailers who hire union trucking firms with collective bargaining agreements that specifically waive retailer liability.

The bill has support from the mayors of port cities Long Beach, Los Angeles and Oakland. Like the California Supreme Court decision in Dynamex, SB 1402 will likely increase the number of cases in which port drayage motor carriers will be found to have misclassified drivers as independent contractors.

In Dynamex, the California Supreme Court liberalized the test for employee status in California and created a rebuttable presumption that an individual working for a company or another individual is an employee as opposed to an independent contractor. This is significant because employers are responsible for paying federal social security and payroll taxes, unemployment insurance taxes, and state employment taxes as well as providing workers compensation insurance for their employees. Not so for independent contractors. Moreover, employees, and not independent contractors, are covered by a plethora of state and federal employment laws that regulate wages and hours and others terms and conditions of employment.

What Can I Do to Minimize Exposure?

SB 1402 contains language stating that parties may contract for and enforce a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier. As such, we recommend that you work with your legal counsel to review and update any existing contracts you have with port drayage motor carriers in order to disclaim any liability and impose indemnification obligations to the extent that you are held responsible for a contracting party’s failure to properly classify its workers or for violations of state labor and employment laws, including those implicated by SB 1402.

Your legal counsel can also advise you on how to protect against secondary boycotting by union shops. Increasingly retailers and other shippers are experiencing picketing and related activity, sometimes without any notice, in an attempt to dissuade them from conducting business with drayage carriers who fail to unionize.