There has been a tremendous focus in recent weeks on the fragilities of our nation’s supply chain. Some everyday products are in frighteningly short supply, hundreds of container ships are waiting weeks to be unloaded, and ominous warnings are being issued that Christmas may not be coming this year.
It should be noted that those warnings refer to the heavily commercialized and materialistic Christmas. Religious observers will point out that traditional Christmas remains on the calendar. This will be a shock to many – but that is not really our point today.
While there are many facets of the supply chain organism that are contributing to the delays we are now experiencing, one critical element that has only received nominal attention in the press is an issue that our industry has been debating over the last few years. The California Supreme Court issued the now-famous Dynamex Decision in 2018 that severely redefined the classification and legal use of independent contractors in the state. California legislators codified that decision with the passage of AB 5, which essentially eliminated the use of independent contractors in the majority of professions where they are often found. This has been an important issue for the workers’ compensation industry on two fronts. First, there has been a long-running debate about how to provide occupational protections to these independent workers, and second, many of the support functions employed by our own industry are done so through the use of independent contractors. AB 5 represented a two-sided sword to the workers’ comp industry – a situation where the irony was not lost on those affected by it.
Today, of the estimated 3.5 million truckers in the US, it is believed that more than 1 out of 9 are independent owner-operators. In April of this year, the US 9th Circuit Court of Appeals ruled that those truckers are not exempt from California’s AB 5 restrictions. That means, while thousands upon thousands of containers are waiting in California ports and on ships anchored at sea for truck drivers who can move them into the heartland; almost 400,000 of those drivers cannot legally work in California unless they are willing to do so under the employ of another company.
The law of unintended consequences always seems to rear its ugly head at the most inopportune times. This would certainly be one of them. The busiest US ports closest to our major supply partner China are unable to use any of the available independent labor that could aid in alleviating the supply backlog we are seeing. If those ports were in any other state, the situation would still be serious, but not as dire as it appears today.
California Governor Newsom could issue an emergency Executive Order exempting those independent truckers from AB 5 restrictions for the next 12 months. That would be a major step in helping the nation restore its footing, and in making sure essential items are reaching those who need them. Alas, the political winds indicate he is unlikely to take such action. The upside means that the goods that do manage to leave the ports will be hauled by people covered against occupational injury. The downside means that you may have to teach your kids what the original purpose of Christmas was. Fortunately, we have a couple months to bone up on that, in case we don’t actually remember it ourselves.