I cannot stress the importance of this enough – whenever you are making or planning decisions that involve your livelihood, stop and think twice. You should be sure that whatever the decision is, there should not be any long-term ramifications that will come back to haunt you later. Rick, a southern California-based OTR owner operator, recently called me to get some advice. He wanted to know whether he should break off from his carrier and go on his own. I asked him what he grossed last year – he said around $211,000. Then, I asked, what did you net after your expenses? He replied about $84,000. I told him that the average OTR driver makes about $42,000. I asked, “Why would you leave your prime carrier to go out on your own and have even more headaches? Have you been smoking funny cigarettes?” He laughed. He just wanted to make sure he had made the right decision, and I hope he did.
Back in my “Mad Men” days of the 1960s, where it was customary to have a two or three martini lunch, I worked at Pacific Intermountain Express (PIE). I would meet every night after work with management from East Texas Motor Freight (ETMF), Transcon Freight Lines, and whoever else showed up from all of the local trucking outfits in Commerce, California. There was usually six or seven of us, and we would often end up discussing union problems, and how best to solve them. Some of these people went on to start their own companies – which leads me to my main story.
There was once a very good small trucking company in Carson, California headed by Brian Wormel. Brian was a past executive at Transcon Freight Lines, and a personal friend of mine from many years back. Brian started Pac-Rim Container Services. Charlie Slayman, his operations manager, was also another personal friend of mine and a former boss from California Cartage Company. Brian’s office manager was a gal named Lisa Hodges, who was lovely to look at and smart as a whip. This group ran a really good company and treated their drivers very well.
Once, when the subject of unions came up, Charlie told me that he would go union in a minute, if their customers would pay the rate that would be required to pay those high union wages. Now, stop and think about that for a minute. Do you really think consumers would agree to pay more for products so that people could earn a union wage?
Walmart’s prices keep falling – do you know why? Because Walmart, and others, demand that the transportation companies they use reduce their rates by a certain percentage each year. It seems that everyone wants the cheapest price when shopping, even you and me, so what goes around comes around. Now, it doesn’t take a dummy to figure out that the owner operator is at the low end of the totem pole, in regards to the transportation business, and that consumers are not willing to pay more for their goods, so Brian’s theory was mute.
Well, as time passed by, Lisa moved to Texas, Charlie passed away, and Brian wanted to retire. In January 2008, Green Fleet Systems acquired Pac-Rim. They took over the full operations of Pac-Rim’s assets, all of their customer base, and continued to grow. As the name implies, Green Fleet was committed to being one of the first fully “green” trucking companies, operating environmentally-friendly trucks, in the Los Angeles Harbor. They were even selected by Volvo-Mack to test their next alternative fuel tractor.
Green Fleet bought all new trucks through the Clean Truck Program and leased them back to their independent contractors. Everything was looking rosy until August 2013, when their independent contractors (ICs) decided to set up picket lines at the Green Fleet warehouse and, if I remember right, they even organized pickets at some of Green Fleet’s customers. Many drivers filed charges with the National Labor Relations Board, and then everything started to go downhill for Green Fleet.
In October 2013, a federal district court judge ordered Green Fleet to reinstate two truck drivers, both independent contractors, which the company had let go. The National Labor Relations Board had filed a request asking the two drivers be taken back. These two drivers had previously filed wage claims against Green Fleet, arguing they were employees but had been misclassified as independent contractors. In its order, the court agreed with the labor board that the company let the drivers go because they refused to drop their wage claims. The court also said it believed the labor board would find the two were employees, not independent contractors, if they investigated.
In November 2013, the drivers went on a 36-hour strike protesting unfair labor practices and wages. In June of 2014, the NLRB stated that in August they would hear their complaints. In July of 2014, about 120 drivers went on strike again. Fast forward to February 2015 – Green Fleet filed for Chapter 11 bankruptcy protection on February 2, 2015, saying it owes “unknown amounts” of taxes and penalties to the city of Carson (California), the IRS, the California Employment Development Department, and other government entities.
The filing also mentions six litigation cases with employees pending with the California’s Labor Commissioner’s Office. The NLRB filed complaints against Green Fleet, alleging it was harassing its truck drivers because of the attempts to join the Teamsters. Green Fleet employs about 100 employee drivers and another 35 drivers it says are independent. In its bankruptcy filing, the company reported income of $17.6 million last year.
A labor-backed advocacy group called Los Angeles Alliance for a New Economy has estimated in a May 2014 report that Green Fleet could potentially have to pay $943,000 if all six employees with pending wage claims were awarded back pay. It also estimated that should the firm’s 35 independent contractors also file for back wages, Green Fleet could owe $4.8 million. So, based on the revenue required to recover from the above $4.8 million, and if the company had a 5% profit margin, Green Fleet would have to generate about $96 million in new business just to compensate for this fine. This is almost six times what they made last year – it would never happen, and, sadly, this once-great company is on the verge of being done.
Be careful what you wish for, and also be careful not to bite the hand that feeds you, because, in the end, if your company goes out of business, you and many others could be out of a job. These are just some of the unintended consequences people don’t think about when deciding to go after their company! Next month, unless a breaking news story comes along, I’ll tell you the story of how a person purchased the twelfth largest motor carrier in the United States for just $12.00! Stay tuned!!
