One of North America’s oldest labor unions is battling what it says is a purposeful misclassification of port and rail truck drivers as independent contractors, a tack that strips them of health insurance and other benefits that payrolled employees get. Now, it’s taking its fight to the boardroom.
The International Brotherhood of Teamsters, which represents more than one million workers in the United States and Canada, filed shareholder resolutions this month with four retailers, including Urban Outfitters Inc. and T.J. Maxx owner TJX Companies, urging them to investigate their supply chains for the underpayment of workers.
Misclassification, it said in the resolutions, is a “significant” problem for drivers who haul goods from U.S. ports, resulting in a potential $850 million in wage theft every year. The filings, addressed to each company individually, noted that Urban Outfitters and TJX’s codes of conduct require vendors to comply with laws governing wages, hours and benefits, as well as provide workers with clear terms of employment, yet they have “nonetheless” failed to address an issue “affecting reputational and financial risks and human-rights concerns.”
Teamsters, which hold shares in the retailers, has asked the respective boards of directors to prepare a report, available at least 90 days before the 2023 annual shareholders meeting, that covers the financial, reputational and human-rights risks resulting from the use of vendors that misclassify employees as independent contractors.
Urban Outfitters did not respond to an email seeking comment. A TJX spokesperson declined to discuss the proposal but said that the company requires its third-party transportation service providers to comply with all applicable statutes, laws, ordinances and regulations through its written contracts with them.
The timing of the requests has never been more apt, said Michael Pryce-Jones, who handles corporate governance at the Teamsters. The Covid-19 pandemic has thrown port management into unprecedented disarray, placing the perils of poor supply chain practices “really front and center” in hubs such as Long Beach and Los Angeles. Companies operating in California also have to contend with SB 338, which Governor Gavin Newsom signed into law in September, placing additional liabilities on those who continue to use vendors blacklisted by the state for misclassifying drivers.
“Two or three years ago, we began engaging some of these companies in discussions, trying to get them to improve their practices and also get them to try and look into what’s happening in their supply chains,” Pryce-Jones said. “And it’s not clear there’s been sufficient progress. So we thought, given the supply chain crisis and SB 338 and the lack of movement we’ve seen, that it was an appropriate time to really push companies.”
While retailers have made strides in disclosing the human-rights abuses that lurk in their overseas supply chains over the years, Pryce-Jones noted, there doesn’t appear to be the same “coming to grips” with their domestic operations.
“There’s always been a split between overseas and domestic because the rule of law is seen as so much stronger in the U.S. than in some of the countries where product is manufactured,” he said. “But that doesn’t mean there aren’t human-rights violations going on. And it does go to an issue that is obviously on the front burner for many companies, which is racial equity. These ports are overwhelmingly Hispanic and other minorities. That should be an alarm bell for these companies.”
Pryce-Jones says he hopes the proposal will make it to the ballots for voting, but what the Teamsters will ultimately like to see is for retailers to take seriously what’s happening in their supply chain and “ask the tough questions, not just rely on the answers they’re getting from their logistics providers.”
According to SB 338, California’s ports, which process 40 percent of all U.S. shipping container traffic, could harbor as many as 16,000 misclassified drivers. It also dubbed this largely immigrant workforce as the “last American sharecroppers” who are “held in debt servitude” and work “dangerously long hours for little pay.” In the past decade, the California Labor Commissioner’s office awarded more than $50 million to misclassified port drivers.
Teamsters general president James P. Hoffa previously criticized Greenwich, Conn.-based XPO Logistics Inc. for misclassifying hundreds of its drivers, saying that it “led the race to the bottom we’ve seen across the trucking industry, skirting or outright ignoring the law in the name of corporate profits and shareholder dividends.”
XPO said, however, that many of its independent contractors prefer the scheduling flexibility the status allows.
“We believe we adhere to all federal, state and local laws, and we believe we properly classify all individuals and businesses that perform work on behalf of XPO,” a spokesperson previously told Sourcing Journal. ”In addition, any independent contractor with a commercial driver’s license who wants to work for XPO as a full-time employee is welcome to apply for any number of truck driver openings offered by XPO.”