This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
2020 will be a pivotal year for the intermodal industry as the ramifications of legislation — signed into law in California and potentially in New Jersey — regarding the status of independent contractors begin to be felt. This legislative push will cause a serious disruption in the intermodal freight supply chain and increase shipping costs, and it demonstrates a lack of understanding from state legislators about the intermodal business.
High-quality, committed intermodal motor carriers and drivers transport over 60 million shipments of international cargo every year, filling store shelves around the country with products we all consume. The independent contractor model affords individuals the ability to be independent businesspersons, owning and operating their own equipment and deciding when and where they do business and with whom they do that business. It also allows for motor carriers to manage their businesses more efficiently, due to the fluctuating nature of the freight business. IANA believes drivers should be able to choose whether they prefer being company drivers or independent contractors, not have the choice forced upon them by legislators or the government.
The legislative initiatives — dubbed AB 5 in California and S4204 in New Jersey — are exacerbating the driver shortage issue. Both laws make it much more difficult for a worker to be considered an independent contractor and are, in effect, forcing intermodal drivers to leave their profession. A shortage of available drivers matched against an increasing volume of goods to be transported requires motor carriers to improve operating conditions for drivers, not penalize or push them out of the business.
While these initiatives will have a significant detrimental impact to intermodal, they will have broad impacts on many businesses and the nation’s economy. In California, for example, a coalition of ridesharing companies, including Uber and Lyft, whose business models are also heavily impacted by the new labor law, is developing a ballot measure to allow their workers to continue operating as independent contractors.
New Jersey’s legislation severely restricts the use of independent contractors by creating a presumption of employment status for contractors. While it is modeled after AB 5, this bill would be the most restrictive independent contractor regulation in the nation.
These laws, which will affect several of the largest ports in North America, are about to restructure a linchpin of the intermodal freight supply chain without a clue to its impact on independent contractors or the American economy. They are not a good idea and will add unnecessary costs that ultimately will be passed on to consumers.