Bankruptcies are piling up around the ports of Los Angeles and Long Beach as trucking firms that haul goods to and from the docks increasingly are ending up on the losing end of litigation brought by drivers who claim they have been misclassified as independent contractors rather than employees.

Drivers have filed 802 claims against ports trucking companies with the California Industrial Relations Department since 2011, alleging they have been denied benefits. Those claims have resulted in more than $35 million in payouts to drivers and, recently, led a number of companies to seek bankruptcy protection.

Among the most recent filings are those of Carson’s Pacific 9 Transportation Service Inc., which filed for protection last month after losing a battle over the status of its workers, and Compton-based Total Transportation Services Inc., which operates at the ports of Los Angeles and Long Beach. It came up on the losing end of 11 claims filed with the California Labor Commissioner’s Office on behalf of independent contractors. They are the latest of nine trucking firms to have filed for bankruptcy since 2014.

“Court after court is finding that those drivers were misclassified as independent contractors when they’re actually employees,” said Julie Gutman Dickinson, partner at Glendale law firm Bush Gottlieb, which represented drivers in the Pacific 9 case. “But many of those companies continue to break the law.”

The company was ordered by the state’s Division of Labor Standards Enforcement to pay $6.9 million in back pay to its drivers.

Curtis Whalen, executive director of the American Trucking Association in Arlington, Va., called out the Teamsters union, which he said was behind the push to have the drivers converted from contractors to employees.

“There is a long list of companies that were targeted by Teamsters, who beat them to death within the regulatory process,” he said. “California is leading the way on this.”

No need to change

Whether the litigation is having the desired effect is unclear. There has been a spate of bankruptcies, but trucking companies don’t appear keen to change their business model.

Weston LaBar, executive director of the Harbor Trucking Association in Long Beach, which represents trucking companies at the ports, said the contractor model works for plenty of people.

“We have a lot of truckers who want to be independent drivers,” he said. “To reclassify someone who is really happy and doing really well as an independent contractor as an employee, it threatens their ability to move cargo.”

Switching those workers to staffers, LaBar said, could push up costs for goods and products.

“It would increase costs for export and import if we move to the employee model,” LaBar said. “It’s going to cost the customers of trucking companies.” 

One cost that has already climbed is the cost of defending against the litigation and mounting judgments.

“The amount of awards and judgments against companies based on misclassification claims and costs to appeal those claims present a financial hurdle,” said Alex Cherin, a spokesman for the California Trucking Association in Sacramento. “It’s enough to draw some companies into bankruptcy.”

But advocates for drivers say trucking companies would have an easier time if they followed the wishes of workers – allowing them to save the money that’s going to attorneys.

“Companies were misclassifying their drivers as independent contractors and fighting their efforts to become employees,” said Barbara Maynard, a Teamsters spokeswoman. “That fight is costing them a lot of money. Instead of saying, We get it, they’re fighting.”

Compensation conflict

Eddy Osoy, a driver for Intermodal Bridge Transport Inc., is one of those who filed suit. His case has been pending for more than two years, and he has continued working as an independent contractor for the company. As a contractor, Osoy said he had worked for IBT for more than nine years with no insurance, paid sick days, or vacation. Osoy added that he once broke his arm while at work and had to take three weeks of unpaid sick days to recover.

“It’s been going on for many years,” he said, through a translator. “I’m tired of the abuse.” 

IBT, headquartered in Secaucus, N.J., did not respond to a request for comment.

Maynard of the Teamsters said the ports have to be more actively involved in helping to resolve disputes like this. 

“Trucking companies are violating the law and continue to fight,” she said. “How long will the ports of Long Beach and Los Angeles allow those companies to do business on their property?”

But Art Wong, spokesman for the Port of Long Beach, said the port has no role in this battle.

“We don’t operate trucking companies and we don’t tell them how to operate,” Wong said.

A spokesman for the Port of Los Angeles said it aimed to “bring all parties together.”

The American Trucking Association’s Whalen said when a trucking company files for bankruptcy it creates a no-win situation.

“It puts a lot of pressure on individual companies,” he said. “Even if Teamsters force a company into bankruptcy, no one is winning. The company simply won’t employ anyone.”