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AB5 law at heart of Universal-Teamsters labor deal in Southern California

Former independent contractors to be hired as employees under contract that ends long dispute

A lengthy unionization battle in Southern California involving Universal Logistics has ended with what backers of the AB5 law on independent contractors said they want to see in the state’s trucking sector — a new batch of Teamsters union members.

In a deal that involved the National Labor Relations Board refereeing the dispute, Universal (NASDAQ: ULH) and the Teamsters agreed on a multipronged settlement that involves drayage drivers who had been classified as independent contractors becoming employees, recognition of the Teamsters as the bargaining representative of the drivers and a collective bargaining contract covering them.

“The agreement brings the company into compliance with the state law known as AB5 as well as the National Labor Relations Act,” the Teamsters said in its statement.

The union added that its drivers have voted unanimously to ratify the contract.

Trucking had been exempt from California’s AB5 law on independent contractors, with its ABC test that limits the ability of workers to be considered independent and not employees. 

Universal addressed the issue of AB5 directly in its statement on the deal: “The agreement will provide the local membership with great benefits and Universal’s customers with AB5 compliant and reliable services in the Los Angeles and Long Beach drayage market.”

Turning drivers into employees is the most direct way to comply with AB5, which as of Monday is fully in effect in the state’s trucking sector after having been kept at bay since the start of 2020. 

Other methods for complying with the independent contractor law are more complex, such as the “two-check” system where trucking companies hire drivers employed by an outside agency (which have hired the drivers as employees), or the brokerage model, where a trucking company modifies its business plan to become more of a brokerage house and brokers freight into drivers that had been operating under a lease from the company but instead went out and received their own motor carrier authority from the Federal Motor Carrier Safety Administration.

Having once-independent contractors converted to employees has always been seen as the least ambiguous road to compliance with AB5 but one which conventional wisdom had said companies would try to avoid.

“I think Universal is a role model now for complying with AB5 and reclassifying these workers as employees instead of independent contractors,” said Julie Gutman Dickinson, an attorney with the firm of Bush Gottlieb, which represents the Teamsters.

Dickinson also said the arrangement with Universal contains aspects of the two-check system being pushed as a solution by TransForce. Drivers who own their trucks and were performing work for Universal as independent contractors will now receive a check for their services from Universal and will lease their truck back to the company.

The closure of a Compton, California, facility operated by Southern Counties Express, a Universal subsidiary, was at the heart of the dispute with the Teamsters. 

While the number of Compton workers who will be offered reinstatement is 66, Dickinson said there are “several hundred” other Universal workers now considered independent contractors who, as a result of the agreement, also will be offered employment as W-2 workers, another term used for full-time employees. 

The deal ends a contentious several months between the Teamsters and Universal. The union successfully persuaded the NLRB to file charges against Universal last year. The union had filed charges against Universal in 2019 at the NLRB that included an allegation that a company decision to close its Compton facility was in reaction to the Teamsters being certified as the bargaining representative of the workers there in early 2020, shortly after a representation election won by the Teamsters.

The charges against Universal led to a decision last year by an NLRB administrative law judge that the company had committed violations of the NLRB Act. Those charges were resolved in the settlement. The NLRB said there were additional charges set to go to trial earlier this month, but those have been resolved as well by the agreement.

In a statement, Universal described the negotiations as “careful” and that the “arrangement” was “best in class … firmly anchored by a top-notch labor agreement.”

Also in the statement, Universal CEO Tim Phillips put the number of Universal Logistics employees who are Teamsters members at 2,000. In its 10-K for 2021, Universal said worldwide it had 3,142 employees who were “subject to collective bargaining agreements.”

Universal had not responded to a request for further comment by publication time.  

The NLRB statement on the settlement described it as a “comprehensive solution to (the) long-standing dispute about the proper classification of drivers as employees or independent contractors.”

The NLRB also said the deal involves back pay to the 66 drivers dismissed earlier by the company, an offer to reinstate them and the option for other drivers at Universal’s intermodal operations in Southern California to be transferred into full-time positions, where they would be represented by the Teamsters.

“The resolution of these cases shows that it is never too late for parties to recognize that it is in their mutual interest to resolve their disputes without lengthy and expensive litigation,” Region 21 Regional Director William Cowen said in the NLRB’s prepared statement.

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  1. Another win win for Labor Unions handed out by the left. That’s why this whole mess started anyway. Gotta love it when you are given a choice at the end of a gun barrel…….

  2. Yes you are right. I was born and raised in California. started driving in 1998. Became an Independent Contractor in 2000. I will not become a company driver employee unless I had no other choice. And the two checks deal is a rip off and a scam.

  3. Why weren’t any of the once independent freelance truckers interviewed for this article? How do the majority of these drivers feel about this? They’re the ones impacted the most by this action, yet no one talked to them?

  4. The teamster’s is a joke. And causing more driver shortage. This is totally the dumbest thing they could do. Let’s put the teamster’s up for a vote. I vote to get rid of anything that says teamster.

    1. This will protect the drivers and lease ops
      A big problem in California and ont is too many drivers get sick and injured. We need at least 10 paid sick days plus temporary housing so sick injured truck drivers are not in homeless shelters 🇨🇦

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.