LA City Council Vetoes Preferential Operating Agreement

Los Angeles City Council Unanimously Vetoes Preferential Operating Agreement Granted to Law-Breaking Trucking and Warehouse Company Approved by Port of LA Harbor Commission

Los Angeles, CA – Today, the Los Angeles City Council, which oversees the largest container port in North America, unanimously vetoed the Foreign Trade Zone Operating Agreement (FTZ) granted by the Port’s Harbor Commission to California Cartage’s warehousing and port trucking operations located on Port property in Wilmington, CA. The FTZ designation provides a clear competitive advantage to NFI/Cal Cartage, the largest trucking and warehousing operation at the port, by providing tax breaks to its retail clients. The Los Angeles Harbor Commission approved the FTZ for Cal Cartage, which was purchased by NFI Industries in October 2017, despite the ongoing pattern of violations of health and safety, employment, and labor laws at the company (see list of legal and regulatory action below).

For the past three years, NFI/Cal Cartage warehouse workers and port drivers have persistently demanded that the LA Harbor Commissioners address the enduring law-breaking at the company’s warehousing and trucking facilities, which are located at 2401 East Pacific Coast Highway, which is owned by the Port of Los Angeles. This site includes the NFI/Cal Cartage warehouse and two related trucking companies, K&R Transportation and California Cartage Express.

“We entrust our City authorities with ensuring compliance with all City contracts, especially when these agreements give corporations like NFI/Cal Cartage a competitive advantage,” said Eric Tate, Secretary-Treasurer, Teamsters Local 848, in a letter to Councilmembers in advance of the vote. “Given the sheer volume of government findings, ongoing investigations, and unmistakable evidence that Cal Cartage is a recidivist law breaker, it is overwhelmingly clear to us that the Harbor Commission failed to ensure that Cal Cartage meets the necessary requirements in the Operating Agreement.”

“Time and again I have told the LA Harbor Commission that NFI/Cal Cartage is breaking the law by misclassifying me as an independent contractor yet they continue to give sweetheart deals to the company,” said Gustavo Villa, a misclassified port truck driver employed by Cal Cartage Express. “I am so grateful that Councilmember Buscaino stepped in to block this sweetheart deal for a company that has shown no regard for the laws of the land.”

“For the past four years, I have worked at the Cal Cartage warehouse and have been outspoken about the unsafe conditions there. There are forklifts that don’t brake and the high heat is a problem. A co-worker got sick because of the over 100 degree heat inside the container and management said to just cover him with boxes,” said Bruce Jefferson, a Cal Cartage temp warehouse worker. “Every job at the ports should be a good and safe job, and I’m glad that the City Council agrees that no special tax breaks should be given to companies that are breaking the law.”

“We should never give incentives, like the Foreign Trade Zone Permit, to law-breaking companies where abuse and pressure to work quickly are common, where faulty brakes on forklifts are left unrepaired, and where truck drivers continue to drive for 18-20 hours per day for pennies,” said Alice Berliner, Southern California Coalition for Occupational Safety & Health (SoCalCOSH). “When the Harbor Commission renewed the NFI/Cal Cartage Foreign Trade Zone Permit, they sent the message that it’s okay to pay workers poverty wages, it’s okay to steal drivers’ wages, it’s okay to allow occupational injuries, and in some cases fatalities, on City property. And most importantly, when the Harbor Commission renewed NFI/Cal Cartage’s FTZ Agreement, it sent the message that the City of Los Angeles condones this abuse. Today’s Council veto of the Agreement reverses this unjust decision and sends a strong message that worker health and safety matters.”

On April 5, 2018, the LA Harbor Commission approved a one-year Foreign Trade Zone (FTZ) Operating Agreement with the company. On April 17, 2018, the LA City Council approved a motion filed by Los Angeles City Councilmember Joe Buscaino to assert jurisdiction over the matter, and on May 1, 2018, the Trade, Travel, and Tourism Committee recommended that Council veto the Harbor Commission’s approval of the FTZ agreement. Today, the full City Council voted to veto NFI/Cal Cartage’s FTZ Operating Agreement.

Background: Regulatory Action and Litigation at NFI/California Cartage

California Cartage, based in Wilmington, CA, is one of the largest goods movement companies in America, with warehouses and port trucking operations across the U.S. Referred to herein as “NFI/Cal Cartage,” this family of companies was recently acquired by the New Jersey-based National Freight Industries (NFI). Previous to this acquisition, Cal Cartage was owned and managed by Robert Curry, Sr. and his family. NFI/Cal Cartage represents the largest trucking operation at the Ports of Los Angeles and Long Beach by a wide margin.

Port Trucking Operations

The NFI/Cal Cartage family of companies includes five major trucking operations at the Ports of LA and Long Beach. The four largest – K&R Transportation, California Cartage Express, ContainerFreight EIT and California Multimodal LLC (CMI) – have been facing multiple claims in the courts and government agencies for misclassifying their drivers. In several instances, agencies have already determined that drivers were, in fact, employees. K&R and California Cartage Express operate out of the same property as the Cal Cartage warehouse (described in the following section), CMI operates out of a nearby Wilmington yard, and ContainerFreight operates out of a yard in Long Beach. Combined, more than 600 alleged misclassified drivers work for these companies.

Agency Investigations and Determinations

California Labor Commissioner

Employee determinations:

  • Over the past two years, there have been at least 12 decisions issued by the California Labor Commissioner in individual claims filed by NFI/Cal Cartage drivers working for K&R Transportation, Cal Cartage Express, ContainerFreight, and CMI. All of these claims found that the drivers were, in fact, employees, and not independent contractors. Together, those decisions ordered NFI/Cal Cartage to pay those 12 drivers a total of $1,419,102.62 for Labor Code violations including unlawful deductions and unreimbursed expenses. NFI/Cal Cartage has appealed twelve of these cases, settling eight of them, while one remains pending in Superior Court.

Pending claims:

  • There have been an additional 28 Labor Commissioner claims that drivers have filed against NFI/Cal Cartage, all of which appear to be pending (of these, 15 were filed by K&R drivers and 12 by CMI drivers). 10 of the K&R drivers had their hearings in December 2017, and a decision is pending. There are hearings scheduled beginning May 7, 2018 in the claims of 10 CMI drivers. The total liability for those 28 claims is over $5 million.

California Employment Development Department (EDD)

  • At least four K&R drivers have been determined to have been employees – not independent contractors – by the California EDD in individual benefits determinations.
  • In June and September of 2017, the California EDD filed at least two tax liens against K&R Transportation.

Los Angeles City Attorney

  • On January 8, 2018, Los Angeles City Attorney Mike Feuer announced that his office had filed lawsuits against Cal Cartage Express, CMI, and K&R Transportation for violation of Unfair Competition Law by misclassifying port truck drivers as independent contractors and evade paying taxes and providing benefits to drivers.

Private Litigation

  • In recent years, NFI/Cal Cartage has faced four class action lawsuits in California Superior Court for multiple Labor Code violations, including willful misclassification, unlawful deductions, unreimbursed expenses, unpaid minimum wages, and failure to provide meal and rest breaks, along with violation of California’s Unfair Competition Law. In December 2017, the last pending case settled for $3.5 million and a motion for final approval is scheduled for May 2018. The company recently settled three similar suits.
  • NFI/Cal Cartage also recently settled two “mass action” lawsuits for misclassification and wage theft in CA Superior Court involving 55 drivers.

Warehouse Operations

Cal Cartage Container Freight Station in Wilmington, CA, is a warehouse and freight center on Port of LA property and employs approximately 500 workers, with 80 percent of the workforce being employed through a temp agency. While Cal Cartage warehouse workers once had good paying jobs that provided benefits, they have not had representation from a union in over 30 years and conditions have suffered. Workers are now paid the state minimum wage with little or no benefits (even though they are entitled to a higher wage under the Los Angeles Living Wage Ordinance), and work in health and safety conditions that are deplorable. The company has been cited for serious health and safety violations twice in the past three years, and workers face serious retaliation resulting in unfair labor practices charges and five strikes.

Health & Safety

The warehouse facility has health and safety issues. The building was built in the 1940s and is poorly maintained. Several workers have been hurt just trying to walk around the facility due to potholes and poor infrastructure. The machines, including forklifts, are not maintained and often have faulty brakes and horns—leading to accidents. Workers filed a formal complaint with Cal/OSHA in June 2015, triggering an investigation at the facility. In November 2015, over $21,000 in citations were issued—4 serious and 6 general penalties. It was noted in these citations that the chipped paint at this facility contains lead.

Cal/OSHA reinvestigated the facility a year later, resulting in additional serious citations in November 2016 amounting $67,150 for the warehouse and $51,275 for the staffing agency. Citations included not providing workers with steel-toed boots, not properly attaching shipping containers to the dock, and repeat violations for unsafe brakes on forklifts. The investigation regarding the company’s abatement of these citations is still active. Workers filed a third Cal/OSHA complaint in November 2017, and the investigation is still pending.

National Labor Relations Board

  • On February 28, 2018, Administrative Law Judge (ALJ) Ariel Sotolongo issued a decision finding that California Cartage and its subsidiary Orient Tally violated workers’ rights at the 2401 E. Pacific Coast Highway, warehouse, including by engaging in unlawful interrogation, implied threats of termination, and confronting workers in a physically aggressive fashion. This decision ordered the company to cease and desist the unlawful behavior, and was issued following a hearing held in June 2017. The case arose after Region 21 of the National Labor Relations Board issued a March 2016 Consolidated Complaint (Cases: 21-CA-160242 and 21-CA-162991) against California Cartage for unfair labor practice (ULP) charges.
  • In 2016, workers at the same warehouse filed additional ULP charges with the International Brotherhood of Teamsters against California Cartage for several unfair labor practices including then company owner Bob Curry threatening to close the warehouse if workers unionized. These charges are pending.

Private Litigation

On December 17, 2014, workers from the California Cartage warehouse on Pacific Coast Highway at the Port of Los Angeles filed a class action lawsuit alleging millions of dollars in wage theft. The workers, many of whom are paid the state minimum wage and have worked through a staffing agency for years, are entitled to the benefits of the Los Angeles Living Wage Ordinance because the warehouse where they work is operated on City of Los Angeles property. Despite this, the workers at the warehouse have not been paid the applicable living wage rate in the 18 years since the ordinance passed.

Under the City of Los Angeles Living Wage Ordinance, Cal Cartage is currently required to provide each worker with either $12.52 per hour for an all-cash wage or $11.27 per hour plus $1.25 per hour in health benefits and as of July 1, 2017, it will go up to be $12.73 all-cash wage or $11.48 plus $1.25 in health benefits. Further, each worker is entitled to 12 paid days off per year. The law extends the obligation to any staffing agencies that are contracted by Cal Cartage and that directly employ more than 50 percent of the workers in the warehouse facility.

The case is currently in mediation proceedings.

NFI/Cal Cartage’s key customers include: Lowe’s, Amazon, TJ Maxx, Home Depot, Kmart, and Sears, as well as the U.S. Department of Defense.