Northern California wine trucking firm shifts into entrepreneurial gear as California's new labor law looms
California’s trucking business is bracing for major changes set to start Jan. 1, 2020, in the use of independent drivers and emissions standards for trucks on the road. In that environment and amid a national industry downturn, a longtime hauler of North Coast wine has started a Solano County-based logistics venture to help those drivers comply and capture jobs that the family regional operation couldn’t previously handle.
The third generation of the Yandell family behind Stockton-based Yandell Truckaway and Benicia-based Santa Clara Warehouses last month got federal and state transportation regulator authorization for Yes! Logisitics. The 7-decade-old family trucking and 4-decade-old warehousing businesses will continue to operate as before, but Yes will coordinate with Yandell and other carriers for loads in other industries and other areas, according to President Alicia Yandell Hamilton, also vice president of the other family businesses.
“We have a lot of legacy clients that we’ve had for 75 years,” she said. “We’re also moving into some ventures that aren’t basically our bread and butter, which has been the wine industry.”
Those ventures include freight jobs like moving wine to Oregon for a North Coast vintner or moving freight in Texas for a client, something Northern California-focused Yandell doesn’t do but could set up through its network of carriers.
Over the 13 years Hamilton has been working alongside her father, President John Yandell Jr., she has been involved with how the trucking company responded to increasing state and federal clean-air requirements. That has included tighter state standards on soot and nitrogen oxides that are considered key culprits for smog and climate change. Starting next year, the state Department of Motor Vehicles starts phasing in required compliance with California Air Resources Board restrictions on such emissions for light and heavy trucks before the vehicles can be registered.
In 2015, the company purchased 30 new Peterbilt trucks to comply with the new engine standards, and Yandell has reserved 10 of Tesla Motors’ 300-mile version of class 8 heavy truck tractors. But those investments are dwarfed by the expected impact of the way California now classifies a number of independent contractors as employees, Hamilton said.
The California Supreme Court’s 2018 ruling in the Dynamex case tightened the earlier Borello ABC test for whether such contractors should be considered employees and covered by company insurance and benefits. Generally, the court said a truly independent contractor isn’t controlled by the hirer, performs work outside the hirer’s business, and works in the commonly works independently in the profession. That was codified by Assembly Bill 5, signed into law in September and set to take effect on New Year’s Day.
The new law and court ruling are affecting California industries except for a few occupations with carve-outs currently included in the law, such as real estate and insurance agents and physicians.
“We’re coming up against a challenge that is pretty much unlike anything that we’ve ever faced,” Hamilton said.
About half Yandell’s 100 drivers have been independent contractors, drivers who own their trucks and haul most all their loads for the company. About 70,000 owner-operators in the state and over 350,000 nationwide are in the same situation, according to the California Trucking Association.
The trade group was part of a lawsuit against the court decision and in early December filed for an injunction against AB 5, asserting that the reclassification contradicts federal transportation law. The association’s announcement on the filing said it didn’t expect resolution of the matter until after the new law takes effect.
Yandell has explored what to do with the independent drivers over the past three years, Hamilton said.
“Do we take them on as employees? What do we do about their equipment? But at the end of the day, it didn’t make financial sense for us to do that,” she said.
That’s also partly what led to the idea for the new company, Hamilton said. Yandell Truckaway was advising independent drivers to get their own federal road operating authority and insurance. Yes! Logistics is picking up that effort, helping independent drivers file with the state to create their own limited liability companies or another type of business organization and pointing owner-operators toward a number of online services that match freight loads with drivers.
But those independent drivers who will be looking for outside jobs appear to be facing a much tougher environment nationwide for trucking companies, especially small-scale ventures. About 640 firms went belly up in the first half of this year, triple the number that went bankrupt in the same time frame in 2018 and double the number of failures for the whole year, according to Broughton Capital data cited by The Wall Street Journal.