California port drayage provider blames worker misclassification suits for Chapter 11 filing

Premium Transportation Services, which does business as Total Transportation Service Inc., cited industry, political and legal headwinds as reasons it filed for federal bankruptcy protection in Delaware on Monday.    A large Southern California port trucking company has filed for protection under Chapter 11 of federal bankruptcy laws, citing “industry, political and legal headwinds,” including millions of dollars in awards and damages against it for lawsuits alleging misclassification of drivers and $4 million in legal fees since 2014.
   Premium Transport Services, Inc., which does business as Total Transportation Service Inc. (TTSI), filed for reorganization in Bankruptcy Court in Delaware on Monday.
   Sam Joumblat, the chief financial officer of Premium, said in a declaration filed with the court that while the company has attempted to mitigate the impediments it faces, “filing of the case was necessary to preserve the debtor’s (Premium’s) value and assets.”
   The company is continuing to operate under Chapter 11 protection while it restructures.
   Premium was originally formed as TTSI in 1989 “in response to unmet airfreight needs” and established its drayage operations in the late 1990s. Today, it provides drayage, long distance haul and freight management services in California and Virginia and claims to be “one of the largest delivery carriers in the ports of Los Angeles and Long Beach.”
   Customers include Target, Lowes, Ross, UPS, FedEx, J. Crew, and Jophnson & Johnson.
   Premium said it primarily employs owner-operator truck drivers but has some company employed drivers.
   Joumblat explained as a result of “mounting pressure” from the Teamsters, litigation in the courts and before the California Division of Labor Enforcement Standards (DLSE) concerning the legal status of owner-opertors, it entered into an agreement last year following negotiations with the Teamsters.
   The company noted the collaboration was facilitated by representatives of the Port of Los Angeles and the Office of the Mayor of Los Angeles and that it created an affiliate called Eco Flow Transportation that provide drayage services similar to those offered by TTSI, but using Eco Flow employee drivers.
   Premium says it has “experienced downward pricing pressure from some of its major clients over the last year,” while at the same time seeing a rise in fixed and operating costs.
   At the same time, it said its budget issues have been “significantly exacerbated” by litigation related to its independent operators.
   For example, California’s Labor Commissioner earlier this month ruled 11 drivers were employees and not independent contracts, and issued orders, decisions and awards in an aggregate amount of more than $1.1 million. Two other drivers have filed similar misclassification claims. Last month the Los Angeles Superior Court rendered a decision that 14 drivers were employees and proposed damages that Premium estimates amount to between $2.2 million and $2.8 million, plus attorney’s fees.
   TTSI declined to comment further on the court filings.
   “Recent court and DLSE rulings continue to affirm the Teamsters position that drivers moving containers at American’s ports are misclassified,” said Fred Potter, the director of the Teamsters port division. “Ultimately, misclassification damages all actors in the supply chain. Port drivers will not back down until true justice is served, and the International Brotherhood of Teamsters are steadfast in our commitment to support their efforts.”
   During a panel discussion about port trucking earlier this month at the 16th annual TPM conference in Long Beach, Victor LaRosa, the president of Total Transportation Services, said “the frustrating thing that we see today is that it seems that the scale, from a legal and a political sense, has tipped too much in one direction.”
   He noted his company decided to open Eco Flow as an employee-driver company.
   Weston LaBar, the executive director of the Harbor Trucking Association, said many of the large drayage companies in the area around Los Angeles are now allowing drivers to choose whether they want to be independent owner operators or employees.
   “The thing that we find most frustrating is that nobody really cares what the driver thinks,” said LaRosa.
   “What we’re finding in the market is that there are a lot of individuals that still have an entrepreneurial spirit and they want to maintain and they are intelligent enough to run a small business. They want to maintain their status as an independent contractor,” he said. “That puts the companies in a very, very dangerous position because of that open liability. And it also somewhat inhibits the kind of American spirit where you want to go out and pull yourself up by your own bootstraps and start your own business and built a company.
   “That is how we built our company. We started with two trucks,” added LaRosa. “The current legal environment, the current political environment kind of puts a damper on that opportunity.”
   LaRosa agreed “there is a need for some type of regulation to make sure companies don’t take advantage of individuals.” But he said judgment and levies against trucking companies has caused a number of companies to withdraw from the market or go out of business, and this could threaten to the stability of the drayage industry as a whole.
   He said organized labor would like to see consolidation in the drayage industry and that most large drayage companies would also favor that, saying that it could drive efficiency and better profitability for port trucking companies.
   “The problem is that the market is going the other way,” said LaRosa. The number of companies with concession agreements in the ports of Los Angeles and Long beach has climbed from 700 to 750 and where there used to be 8,000 trucks frequently calling the port each day, that number has climbed to 11,000. Instead of 12,000 registered trucks there are 15,000 registered at the ports, according to LaRosa.
   “The reason we’re throwing more trucks at the terminals is because they’re more congested,” he said. “So as we throw more trucks at this congestion we’re actually our own worst enemy, we are creating more congestion.”