Fighting the Cycle of Poverty and Pollution at the Ports of Los Angeles and Long Beach

New Law Ends Payroll Shell Game

November 29, 2011

*This guest blog by Jon Zerolnick was originally published on on LAANE’s blog The Frying Pan.

Fun fact: L.A. leads the nation in jobs—just the kind that most people don’t think of as jobs. We’re the national leader in “nonemployers:” entities relying on independent contractors rather than employees. As economist Jack Kyser explained in 2006, “a lot of people want to have a business but don’t want the headaches of actually having to employ people.” The Times cited Kyser in explaining that “businesses become nonemployers to avoid the costs of workers’ compensation, paid leave, health insurance and state taxes.”

In many cases this sort of practice is, not to put too fine a word on it, illegal. Starting in just a few weeks, though, the state has a powerful new tool to deal with these lawbreakers. SB 459 goes into effect on January 1, 2012, and it levies large fines against employers who willfully misclassify workers as independent contractors to avoid their legal and tax responsibilities.

Not only will this lead to the potential recovery of hundreds of millions of dollars of lost revenue to the state, but it has the potential to dramatically improve the lives of workers.

Workers like Leonardo Mejia. Mejia — profiled recently in a piece on Salon.com that exposed this scam — is a truck driver at the Ports of L.A. and Long Beach. He works for a company called Shippers Transport Express, a subsidiary of the massive SSA Marine, which is itself half-owned by Goldman Sachs. Shippers Transport classifies Mejia as an independent contractor, and gives him an IRS Form 1099 instead of a W-2. But Mejia shows up for work every day at the time and place that the company tells him to. He accepts every truck load given to him by the company, or risks loss of future work assignments. He drives a truck that is registered to the company, and his lease with the company specifies that he cannot use the truck to drive for any other company. He does not bargain for the rates he is paid: the rates are set by the company, and he can take it or leave it. If he chooses to leave it, he turns in his truck and looks for another job.

Is Mejia an independent contractor? It doesn’t seem like he has a lot in common with consultants, computer programmers, freelancers and other true independent contractors who typically set their own hours and rules of business, and who contract with a range of clients. But he does have a lot in common with other port drivers. There are about 12,000 port drivers in Southern California, and about 90 percent are classified as independent contractors. Make that misclassified: the leading national expert on employment issues recently issued a report concluding that the overwhelming majority of the nation’s port drivers are really employees, despite what their paperwork says. (Full disclosure: the report was co-authored by some of LAANE’s partners in the Coalition for Clean and Safe Ports.)

SB 459 is an excellent first step to bringing a degree of justice to Mejia and thousands of other workers. Which may be why business interests are going apoplectic and predicting a coming economic apocalypse, where all employers move to Texas, or go on strike or something.

Yes, the finest minds at the L.A. Business Journal are now coming right out and acknowledging that being forced to play by the rules – pay taxes, respect minimum wage and overtime laws, health and safety laws, and the rights of workers to organize – is a “Job Killer.” Are they really so bold as to admit that the only way businesses can compete is by cheating?

(Goldman Sachs — half-owner of SSA Marine — has its own checkered history with paying taxes. I can understand why the Occupy folks are targeting the company!)

For any sort of responsible business, though, SB 459 should be welcome; employers who play by the rules get undercut by the cheats. If this practice were to continue unabated, it would create a race to the bottom, and the ruination of an entire industry—just as has happened with port trucking since 1980.

Let the hacks raise their bogus objections to following the law: business didn’t get to weigh in (not true); businesses sometimes don’t need full-time, long-term employees (so hire part-time, short-term employees as successful companies do constantly); businesses cannot afford statutory employees (wait—do I really get to not pay my taxes because I spent all that money on executive bonuses?); it’s hard to keep the legal definitions straight (pity the poor employer with an insufficient grasp on employment rules). They’re just sore – and worried – that the free ride may be coming to an end.

Toll Group Management Sacks 1/3 of LA Driver Workforce!

November 1, 2011

With his last $8 in his wallet, Alberto Quiteno said goodbye to his wife and teenage daughters last Friday and traveled 8,000 miles to Melbourne to plea to his employer, the Australian logistics giant, Toll Group, for humane working conditions in the United States.

In his carry-on, Alberto had carefully packed a petition signed by 62 (out of 75) co-workers that local management had previously refused to accept. Along with it was a copy of his sincere letter he sent to Toll CEO Paul Little before his journey to outline the mistreatment and local management missteps. Hearing no response, Alberto headed to LAX and boarded a plane, joined by officials representing America’s largest transportation union, the 1.4 million-member International Brotherhood of Teamsters.

It took an overseas pilgrimage to grab front-section seating at the $8.6 billion corporation’s annual shareholder meeting to nab the undivided attention of the top brass. Alberto even landed a meeting with Mr. Little and another top executive, CFO Brian Kruger. Mission accomplished? Wrong. The 17-year port driver was stunned to learn he had no job to return to once he flew home.

That’s right, after a 30-minute face-to-face and cordial encounter with the retiring executive and his successor, Quiteno – along with 25 other Toll drivers — were all sacked.

The final paychecks of “The Toll 26” were dated and cut on Thursday, October 27, when employees from both the day and night shifts, in a show of unity, clocked in to work wearing T-shirts of the union they desperately want to represent them. That same afternoon 200 community residents, environmental and labor advocates picketed in support of the drivers outside the company’s San Pedro facilities, complete with 1,000 hand-gathered signatures urging justice for the workers who are the backbone of the port economy.

The workers filed another set of retaliation charges at the labor board on Monday, adding a new layer to an ongoing federal investigation. But first, some more backstory from Down Under.

The Toll shareholder meeting was quite the spectacle. Alberto’s allies roamed inside the halls circulating a new white paper by investor analysts with evidence that Toll’s instigation of a contentious low-road relationship with their truck drivers at American ports – at odds with their constructive labor approach in Australia – is a risky move that impairs the company’s reputation, operations, and relations with their retail customers.

Outside, Aussie Toll employees and officials from the Transport Workers Union staged a “sausage sizzle.” It was a lampoon-like BBQ fundraiser for their cash-strapped mates in the U.S., larded with a heavy point: Toll’s non-union employees at the Ports of Los Angeles, Long Beach, Newark and New Jersey do not earn a fair day’s wage for a hard day’s work like their 12,000 unionized counterparts in Australia.

And in the virtual arena, the Teamsters and the Transport Workers Union together launched a website to detail the grim truth at Toll Group in their new joint effort aptly titled GrimTruthAtTollGroup.com.

The result of Alberto’s presence and his backers? Mr. Little was forced to publicly defend his actions which include banishing his truck drivers to filthy, unsanitary outhouses that lack running water. There would be no “riding off into the sunset” for Mr. Little after what should have been his final “legacy” presentation to shareholders, thanks in part to the scrutiny and negative press of Toll’s U.S. operations.

Pretty pathetic for a profitable company that is sending away its head honcho with a golden handshake worth millions. And pretty risky for a company that recently announced its intension to expand its U.S. acquisitions but already carries cargo for popular fashion retailers that come with sweatshop baggage like Guess? and Ralph Lauren’s Polo.

Tell Australia’s Toll Group that US Workers aren’t disposable – re-instate the “Toll 26”!

Tricking Taxpayers and Truck Drivers: Goldman Sachs Brings Wall Street to the Waterfront

October 17, 2011

What’s fueling the ire behind the Occupy Wall Street protests that have spread from Manhattan’s financial district to cities in every state of the country and around the world? For starters, a certain corporation that 99% of us bailed out received $23 billion from the government but only paid one percent of its 2008 income in taxes after raking in $2.3 billion in profit.

And a new Salon.com story “Employers New Ruse: ‘Independent Contracting” may help unearth another master scheme in which Lloyd Blankfein and Goldman Sachs’ tax-avoidance maneuvering runs amok, only this time, the  industry they’re manipulating isn’t banking – it’s global shipping transportation and the tens of thousands of port truck drivers that keep our economy moving.

Salon.com tells the story of Leonardo Mejia, a truck driver for Shipper’s Transport Express, a subsidiary of the massive container terminal operator SSA Marine. Mr. Mejia is one of the nation’s port truck drivers whose employer treats them, for tax purposes, as the boss – even as they boss them around just like the rest of America’s employees. In other words, his company simply hands him a 1099 rather than a W-2, and voila! – bye-bye pesky payroll taxes and business expenses.

Misclassification, as it’s more wonkily known in Department of Labor and union parlance, cost the U.S. government an estimated $54 billion in underreported employment taxes, according to a 2009 report by the Treasury Inspector General for Tax Administration.

What the story doesn’t report, is that Goldman Sachs owns half of the global supply chain giant that Mr. Mejia hauls for, one of the world’s largest transportation and shipping outfits in the U.S. – and the entire planet.

Home foreclosures aren’t enough, apparently. U.S. port truck drivers like Mr. Mejia are facing “foreclosures on wheels” at the hands of Goldman Sachs-owned SSA Marine. Here’s a snippet:

Mejia is part of the shadow economy…purposefully created from the top down, its growth driven by employers increasingly eager to shed costly, legally mandated commitments to their employees.

On an economy-wide scale, the calculated misclassification of employees as independent contractors is a nightmare for workers. It removes the normal protections employers are legally required to give their employees without offering any real freedom in exchange. The practice is also a disaster for governments struggling to balance their budgets, depriving both federal and state governments of billions of dollars in tax revenue.

“It’s a great scheme. The boss pretends their employee is his or her own boss to skirt taxes and force business costs onto the workers, and then the real boss bosses that worker around just like every other employer,” said Dr. David Bensman of Rutgers University, a co-author of a groundbreaking research report, The Big Rig: Poverty, Pollution and the Misclassification of Truck Drivers at America’s Ports,which concluded the typical port truck driver is truly an employee.

“Gaming the system, Goldman Sachs’ Wall Street style is not welcome at our trade hubs, one of the state’s most valuable economic engines,” wrote California Assemblymember Sandre` Swanson in an Oakland Tribune editorial. “World-class ports are vital to our economic progress. We cannot permit Wall Street-style trickery to stand in our way.”

And if you’re a part of the 99% that’s fed up with Goldman Sachs anti-worker, tax-avoidance games at our country’s ports then sign your name to the growing list of Americans who are doing something about it.

Had Enough of Pollution & Poverty? Pledge to End It.

September 30, 2011

A Word from Patricia Castellanos, Chair of the Los Angeles Coalition for Clean & Safe Ports

Our movement for environmental and economic justice was dealt a real blow by corporate polluters and anti-union interests this week. They convinced the 9^th Circuit Court of Appeals panel that an arcane loophole in the law prevents the nation’s largest port from fully implementing the EPA-award winning LA Clean Truck Program.

Are you willing to stand with the nation’s port workers and residents who are pledging to not take this sitting down?  The nation’s 110,000 first-rate truck drivers who have long been subjected to third-world working conditions will be the first to feel the impact of this blow – along with the 87 million Americans who live and work in polluted port regions. Now they need to hear that we will fight back with them.

While top-notch attorneys representing the port and environmental groups like Sierra Club and the Natural Resources Defense Council succeeded in preserving many of the pioneering standards that helped introduce thousands of clean trucks into service, conservative judges put the brakes on the regulation that would stop the industry’s dirty tricks that brought diesel-soaked air and dead-end jobs to our communities in the first place.

If upheld, profitable, multi-national corporations like Maersk and the Goldman Sachs- owned SSA Marine will continue to disguise their truck drivers as independent contractors in a widespread scheme to cheat on taxes and force struggling blue-collar workers to buy and maintain the next generation of green trucks. Underpaid truck drivers and overburdened taxpayers should not be forced to foot the bill for industry giant’s diesel mess!

Pledge to support these workers in their fight to make the global shipping and trucking industry pay to clean up their dirty diesel mess, and treat them with the dignity and respect they deserve! 

Thousands of truck drivers are standing up and speaking out, and they need to know we have their backs. Take the pledge to amplify their voices and ask your friends to do the same. Across the country, I, along with partners from over 150 organizations united in the Coalition for Clean & Safe Ports, will personally share your show of solidarity with truck drivers in Los Angeles, Long Beach, Oakland, Seattle, New York, Newark, Houston and Miami.

Your past support of the LA Clean Truck Program and the Clean Ports Act of 2011 demonstrates you care deeply about clean air and good, green jobs.  Let’s show these corporate bullies who trample on workers and pollute our communities just how much powerful we become when the going gets tough.

Port Convention Attacked by Pranksters Armed with ‘Snark and a Pointed Critique’

September 13, 2011

Port officials and shipping industry leaders attending the annual American Association of Port Authorities convention woke up to find themselves the unwitting victims of a prank by environmental, faith, labor and community activists.