SB 1402: Joint liability for port trucking customers

On Sept. 22, Gov. Jerry Brown signed Senate Bill 1402 (Lara), a bill that establishes joint and several liability for customers who contract with or use port drayage motor carriers who have unpaid wage, tax and workers' compensation liability. The bill took effect Jan. 1. Because of the wide range of industries that depend on port trucking (agriculture, retailers, manufacturing, car dealers), the potential impact of this new law is far-reaching.

SB 1402 requires the Division of Labor Standards Enforcement to compile a list (and post it on its website) of any port drayage motor carrier with any unsatisfied judgments, including for failure to pay wages, imposing unlawful expenses, failure to remit payroll taxes, failure to provide workers' compensation insurance, or misclassification of employees as independent contractors.

The potential "skin in the game" for businesses that rely on port trucking companies comes in the addition of new Labor Code Section 2810.4(b)(3). This provision states that a customer that engages or uses a port trucking company on the "blacklist" shall share all civil legal responsibility and civil liability owed to a driver for services obtained after the date the company appeared on the "blacklist."

SB 1402 contains an expansive definition of "customer" of a port trucking company. Specifically, "customer" means a business that engages or uses a port trucking company to perform services on the customer's behalf, whether the customer directly engages or uses a port trucking company or indirectly uses a company through the use of an agent such as a freight forwarder, motor transportation broker, ocean carrier or other motor carrier.

In order to place customers on notice about any potential joint liability, SB 1402 establishes several notice requirements for port trucking companies. First, a port trucking company, prior to providing services to a customer, shall provide written notice of any unsatisfied final judgments. However, the failure to provide the notice shall not absolve the customer of joint liability under the new law. Second, the law requires a port trucking company to notify a customer within 30 days of a final entry of judgment for specified claims.

Companies that engage with or use port trucking companies will need to develop protocols to monitor the DLSE "blacklist" to determine whether any potential contractor falls on that list. Businesses may wish to build into their contract additional disclosure and notification requirements (perhaps even beyond what the new law requires) before engaging the services of a port trucking company. Finally, potential "customers" may wish to consult with counsel to discuss contract provisions or other methods to minimize any potential liability when dealing with port trucking companies.