Supply chain issues in the United States and particularly the role ports in Los Angeles and Long Beach play, have become a hot topic in the news cycle.

Dwell time for containers at terminals is six days, the wait time for on-dock rail is nearly 12 days and it takes 8.5 days on average for containers on the street to find dock space at warehouses. The situation is so bad that a few weeks ago about 65 container vessels were stacked up along the coast waiting to berth and unload.

In addition to the nationwide labor shortage, ports in California face state-specific challenges.

Last week President Biden announced that the Port of Los Angeles will join the Port of Long Beach in operating 24/7 in an attempt to clear the shipyards of cargo containers and allow the dozens of ships anchored offshore to offload their cargo. That should do the trick, right? Only for people who don’t understand how a supply chain works.

According to the California Trucking Association (CTA), there are more than 70,000 predominantly minority-owned independent truckers operating in California. About 17,000 truckers are registered to bring goods into the Los Angeles and Long Beach ports. Many of those are contractors who own or lease their trucks and don’t receive workers’ compensation or other benefits enjoyed by full-time employees.

Many of these independent contractors are hired by large, well known trucking companies, many of them contract with multiple trucking companies, both large and small. Many of the independent contractors are small businesses themselves and utilize employees and contractors. This business model has existed at California ports for many decades.

However, AB5, enacted in 2019, changes the rules for the California trucking industry model of doing business. It sets as law the ABC test for determining whether a worker is an employee or a true independent contractor. And for trucking, the B prong is viewed as making it difficult to hire independent owner-operators as drivers, because it defines a person engaged in the primary activity of the hiring company – like a trucking company hiring a truck driver – as an employee.

There were two AB5/trucking-related cases on the U.S. Supreme Court docket for this term; on October 5 the Court denied certiorari in the Cal Cartage case, but hasn’t yet ruled on another case brought by the California Trucking Association (CTA).

In that case, a federal judge issued an injunction in January 2020 blocking the implementation of the law in the trucking industry until legal challenges could wind their way through the courts. In April the 9th Circuit Court of Appeals ruled against CTA, but enforcement of that order has been stayed pending SCOTUS’ decision, which means the January 2020 injunction is still in effect.

According to an article by Compliance Navigation Specialists, carriers that have been taking the “wait and see” approach on the law and the court’s process are now facing a near-term reality that the independent contractor system might not be possible and will have to face an increase in costs to hire the drivers.Other carriers have been cutting ties with California as the cost of doing business in the state are greater than the reward and pull out of any California operations to shield themselves from the impact of the AB5 law.

And, depending on how SCOTUS rules on a pending case regarding how California’s AB5 applies to the trucking industry, the problem will only get worse. If owner-operators who contract with larger freight companies must be classified as employees there will likely be a huge contraction in trucking capacity in California.