In 2017, a scandal broke in Los Angeles, California, when it was found that large retail firms
Question:
In 2017, a scandal broke in Los Angeles, California, when it was found that large retail firms such as Target, Costco, and Home Depot were using hundreds of third-party logistics (3PL) providers that were systematically exploiting their workforces. These 3PL firms were contracted to pick up and deliver products from some of the busiest ports in the United States—Los Angeles and Long Beach—and deliver them to locations all around the city. The 3PL firms used truckers, many of them immigrants who spoke little English, in a system rigged in such a way that it turned these truckers into indentured servants, working for next to nothing.
To get a job as a port trucker, men would agree to a wage system that forced the drivers to finance their own trucks, often going in debt over $100,000 in the process. The companies would then use the debt as a lever to force the drivers to work long hours while trapping them in a system that they could not escape. Investigations suggest it was common for the 3PL firms to use the workers for excessive shifts (often as much as 20 hours each day) delivering freight to warehouses and rail yards for shipment, while forcing them to make debt payments on their trucking rigs before figuring their weekly wages. It was common for these immigrant truckers to take home as little as $1 a day after deductions for their financed trucks. No matter how much they worked, they could not get out from under the debt load the company laid on them. If a driver quit, the company seized his truck and kept everything he had paid toward owning it. If drivers got sick or had family emergencies, the companies fired them and kept everything, then leased the truck to someone else. Even workers who managed to hang on to their jobs were often hit with such unfriendly financing charges they ended up working almost for free under this system.
A year-long investigation into these labor practices turned up evidence that more than 140 3PL companies around Los Angeles were systematically exploiting their trucking workforce for years. The large retailers who hired these 3PL firms have been charged with turning a blind eye toward the practice. As long as their products were shipped on time, it is alleged, Costco, Goodyear, and others did not concern themselves with how 3PL providers did their jobs. Among the findings of the investigation were the following:
- Trucking companies forced drivers to work against their will—up to 20 hours a day—by threatening to take their trucks and keep the money they paid toward buying them. Bosses created a culture of fear by firing drivers, suspending them without pay, or reassigning them the lowest-paying routes.
- To keep drivers working, managers at a few companies physically barred them from going home. After returning from a full day’s work, it was common to find the gate to the parking lot locked and a manager ordering drivers back to work.
- Employers charged not just for truck leases but for a host of other expenses, including hundreds of dollars a month for insurance and diesel fuel. Some charged truckers a parking fee to use the company lot.
- Drivers at many companies said they had no choice but to break federal safety laws that limit truckers to 11 hours on the road each day. Drivers at several firms testified that their managers dispatched truckers up to 20 hours a day, then wouldn’t pay them until drivers falsified inspection reports that track hours. Working long hours, in turn, led to serious fatigue and high accident rates, problems the firms left to truckers to deal with.
- Many drivers thought they were paying into their truck like a mortgage. Instead, when they lost their job, they discovered they also lost their truck, along with everything they’d paid toward it.
- Retailers could refuse to allow companies with labor violations to truck their goods. Instead, they let shipping and logistics contractors hire the lowest bidder, while lobbying on behalf of trucking companies in Sacramento and Washington, D.C. Walmart, Target, and dozens of other Fortune 500 companies paid lobbyists up to $12.6 million to fight bills that would have held companies liable or given drivers a minimum wage and other protections that most U.S. workers already enjoy.
The trucking firms themselves dispute these claims, arguing that while there may be some cases of exploitation, it is not the norm in the industry. Nevertheless, since 2010, at least 1,150 port truck drivers have filed claims in civil court or with the California Department of Industrial Relations’ labor commission. Judges have sided with drivers in more than 97% of the cases heard, consistently ruling that port truckers in California can’t legally be classified as independent contractors. Instead, they are employees who, by law, must be paid minimum wage and can’t be charged for the equipment they use at work.
Officials at TJX, the $49-billion parent company of retailers T.J. Maxx, Marshalls, and HomeGoods, issued a statement saying they take these labor abuse claims very seriously, citing its vendor “code of conduct” that requires contractors on its supply chain to follow the law. California’s port truckers make it possible for the Walmarts and Amazons of the world to function. Even so, only Goodyear took immediate action when informed of the problems, dropping their 3PL partner following the California labor commission decisions in favor of dozens of drivers.42
Questions
- To what degree are large retailers responsible for this situation? In other words, is this a 3PL problem or a larger logistics issue that should be addressed across the supply chain?
- We noted in this chapter that companies like Walmart have been very committed to having a sustainable and ethical supply chain and logistics. Does this change your opinion of Walmart, Costco, or any of the firms implicated in this scandal? Why or why not?
- Identify some remedies for this situation. How would you start correcting it if you were to take over one of these 3PL firms?
Managing Operations Across the Supply Chain
ISBN: 978-0078024030
2nd edition
Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley