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    Could CA Labor Law Derail The Supply Chain?

    By Emily Hoeven

    California’s long-simmering war over a controversial state labor law is threatening to boil over at the ports of Los Angeles, Long Beach and Oakland — sparking fears of disastrous ripple effects across a global supply chain already at its breaking point amid pandemic backlogs, ongoing labor disputes and inflation at a 40-year high.

    The escalating dispute is increasing pressure on Gov. Gavin Newsom to outline a game plan for implementing AB 5, a law he signed in 2019 requiring companies to reclassify many of their independent contractors as employees and grant them the requisite benefits.

    On Monday, truckers are expected to protest AB 5 at the Port of Oakland — as they did Wednesday at the ports of Los Angeles and Long Beach. The law was originally set to go into effect in 2020, but tangled legal battles temporarily blocked it. However, the U.S. Supreme Court on June 30 cleared the way for the law to proceed when it declined to consider a challenge brought by the trucking industry, though legal fights are still playing out in lower courts.

    The move threw into legal jeopardy the status of California’s approximately 70,000 independent truck owner-operators, who, in order to comply with new regulations, may have to obtain licenses and insurance that trucking officials say could increase their annual operating costs by $20,000 — forcing some out of the industry, straining an already overstretched workforce and raising consumer prices. But some truckers support the law, saying it will protect them from wage theft and other abuses.

    How Newsom handles the situation could have implications for how he’s perceived on the national stage, especially as he returns to California today from a high-profile trip to Washington, D.C.

    A White House official told Bloomberg that the Biden administration is looking forward to California’s action plan for handling AB 5, and groups ranging from Republican state lawmakers to the trucking industry have sent Newsom letters asking him to take executive action to delay implementation of the law.

    • Retired U.S. Army General Stephen Lyons, the recently appointed White House supply chain envoy, said at a Wednesday meeting at the Port of Los Angeles: “The truckers are so critical to this supply chain and we’ve got to make sure there are conditions that will take care of them. We’ll continue to watch and assess these impacts.”

    Meanwhile, it remains unclear when and how the state will start enforcing AB 5. Newsom’s office did not respond to a request for comment on Thursday.

    But that isn’t the only labor dispute putting stress on the supply chain: About 20,000 pieces of cargo have been piled at the Port of Los Angeles for more than nine days awaiting rail transport, up from a typical wait of about two days, Gene Seroka, the port’s executive director, said Wednesday. Part of the reason: A railroad labor standoff that could lead to tens of thousands of workers across the country walking off the job on Monday if the Biden administration doesn’t intervene before then.

    Separately, West Coast dockworkers and shipping companies are engaged in high-stakes negotiations over a contract that expired July 1, though both sides have committed to continue working until a deal is reached.



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    Jeff Schwartz
    Jeff Schwartz
    2 years ago

    When the government tries to interfere with the labor market by regulating, or over-regulating, employer-employee relationships, this usually results in unintended negative consequences. If and when the government ever stops interfering with labor markets, we will see a tremendous improvement in our economy and more job created. Learn more about how more freedom helps our society by searching for “Jeff Schwartz Thousand Oaks.”

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