California's trucking industry faces new regulations and a visit from the secretary of labor against the backdrop of the state's AB5 independent contractor law.
As of January 1, vehicles with engines older than 2010 are prohibited from operating on the road, although the vehicle itself can be older as long as it has an upgraded engine. Despite this change, there are no indications of capacity constraints in the market. The Outbound Tender Rejection Index for Los Angeles suggests no capacity issues resulting from the new engine requirements.
The phased withdrawal of older engines began in 2015 with the elimination of pre-1994 vehicles and continued with subsequent restrictions. The California Air Resources Board (CARB) considers vehicles from 2010 or newer to be fully compliant with emissions regulations. CARB estimates that approximately 36,900 trucks registered in California and 192,400 trucks registered in other states will fall under the new regulation.
Additionally, Secretary of Labor Marty Walsh visited California to address the impact of AB5, which has been in effect in the state's trucking industry since 2020. AB5 distinguishes between independent contractors and employees using the ABC test, with the B prong posing challenges for the trucking sector. The Department of Labor emphasized the benefits of collective bargaining relationships between truck drivers and employers at the port and highlighted the need for enforcement to ensure fairness in the industry.
The labor-backed AB5 has primarily targeted app-based drivers and the drayage sector of trucking. Universal Logistics' drayage operations in Southern California recently offered full-time employment to drivers, signaling compliance with AB5. The meeting with Secretary Walsh included drivers, representatives from Universal and other trucking companies, Teamsters representatives, and Port of Los Angeles officials. However, the Harbor Trucking Association, representing drayage companies in Southern California, was not invited to the meeting.
While some view collective bargaining as necessary, others argue that not all well-paying driving jobs require it. There is ongoing discussion and debate regarding drayage drivers and the impact of misclassification narratives. Various companies, including Universal, have considered or implemented policies similar to offering full-time employment to drivers to comply with AB5, while smaller fleets and independent drayage drivers seek ways to maintain their businesses within the AB5 framework.