Federal agencies used port trucking companies with labor violations
A USA TODAY investigation finds America’s retail giants have spent a decade ignoring signs of labor abuse in their supply chains, sometimes fighting government efforts to crack down, even as thousands of truckers were driven into debt and poverty. USA TODAY
The U.S. military helped fuel labor abuse at America’s largest ports by relying on trucking companies to move goods even after they violated labor laws and were found to have cheated drivers out of fair pay, a USA TODAY Network investigation found.
XPO Logistics and California Cartage, both found guilty of labor infractions, and another company, Konoike-Pacific, accused of the same kinds of violations by a quarter of its drivers, continue to work as federal contractors or subcontractors.
The companies participate in multi-billion-dollar deals to ship military vehicles and commissary items overseas, raking in taxpayer dollars even after hundreds of drivers leveled formal wage complaints against them.
Drivers at each company said in testimony and interviews they were forced to pay expenses for company equipment. Many drivers said their wages dropped to pennies per hour after companies deducted those costs from their weekly pay. Some said they worked past legal limits and to the point of exhaustion to keep up with the fees. The companies denied the allegations in court.
The Service Contract Act requires federal government contractors and subcontractors to pay their employees minimum wage, with benefits and guaranteed safe workplaces.
After learning of the government’s ties with these port companies, prominent Democrats in the U.S. Senate spoke out against any agencies funding them.
“The DoD shouldn’t be giving taxpayer-funded contracts to companies that cheat their workers out of wages or take shortcuts on safety,” said Sen. Elizabeth Warren of Massachusetts.
Sen. Bernie Sanders called for President Donald Trump to audit the industry and issue an executive order banning port trucking companies with labor violations from receiving federal contracts.
The government shouldn’t reward companies that “exploit and abuse” their truckers, Sanders wrote in a letter Thursday to Trump. “That is unacceptable.”
The Defense Department did not answer questions about what steps it has taken to root out abusive labor practices since USA TODAY Network began reporting on the port industry in June.
“Contracts are only awarded to responsive and responsible offerors,” said Patrick L. Evans, a commander in the Defense Press Operations, which handles media inquiries to the Pentagon.
Evans said the agency refers worker complaints to the U.S. Department of Labor, which enforces labor laws.
Labor Department officials confirmed the agency is investigating California Cartage for potential Service Contract Act violations, after a December 2016 complaint filed by the Teamsters Union. Agency spokesperson Jose Carnevali did not respond to multiple inquiries about other ongoing investigations in the industry.
The USA TODAY Network previously reported that more than 1,100 California port truck drivers have filed labor complaints in civil court and with the state labor commissioner since 2008. That year, a new California environmental law required trucking companies serving state ports to replace old trucks with new, cleaner rigs.
To avoid the cost, many companies pushed their independent drivers into lease-to-own contracts that they didn’t understand and could not afford.
When drivers got sick or fell behind on payments, trucking companies fired them, seizing their trucks and tens of thousands of dollars they had paid toward buying them.
In a 2015 court case, Konoike-Pacific driver Jose Mairena said the company required him to sign a contract without translating it, knowing he couldn’t speak English. He quickly found himself buried in debt from the weekly truck expenses that “left little, if any, take home money for me and my family.”
Konoike-Pacific, a small outfit that specializes in refrigerated cargo, moves containers of frozen food for the Army and Airforce Exchange stores, according to driver manifests spanning from March 2014 to July 2017.
The manifests show the trucking company also has contracts with international steamship giant American President Lines, which has received more than $2 billion in federal contracts from the Defense Department’s transportation division.
Konoike-Pacific and APL did not respond to multiple requests for comment. Drivers’ complaints against Konoike-Pacific went to private arbitration and the outcome is confidential.
Michael Fischetti, Director of the National Contract Management Association, said it’s difficult for federal agencies to police business practices deep in their supply chain. But those agencies can’t ignore labor abuses by subcontractors just because they don’t pay them directly, he said.
“It’s a technicality,” Fischetti said. “It’s not something to hide behind.”
As the USA TODAY Network first reported in June, at least 60 trucking companies operating in California violated labor laws by billing workers for company equipment. But few have received more complaints than XPO Logistics, one of the largest trucking companies in the world, and its subsidiaries.
XPO driver Vahe Olmassakian said he had to refinance his house twice to borrow money in order to keep up with his truck costs while working 14 hours a day. Facing foreclosure in 2015, he finally sold his house and moved his family into an apartment.
“Thank God we could always afford food,” he said.
At least 150 drivers have filed labor claims and lawsuits at XPO’s subsidiaries since 2008.
In that same time period, XPO’s global operation has received almost $160 million in federal contracts from the Defense Department to move and store freight worldwide. Part of that operation is port trucking. XPO driver manifests show deliveries to Marine Corps retail locations around Los Angeles.
Michael P. Kleiman, spokesman for the Defense Department’s U.S. Transportation Command, said in email responses to questions that the agency vetted the company, like it does all prospective contractors, and “it was determined XPO Logistics was a responsible contractor.”
The Defense Department awarded XPO contracts earlier this year and in 2016, according to federal data. California state labor commissioner records show the company’s subsidiaries began losing cases in the Spring of 2015. Last May, the company lost a federal appeal to five drivers for almost $1 million.
XPO, which did not not respond to multiple requests for comment, discloses the decisions, as well as pending claims and lawsuits, in its yearly financial filings.
Photographs from drivers, reviewed by USA TODAY Network and two military experts, show Defense Department vehicles inside the loading yard at California Cartage, one of the biggest players in the Los Angeles ports.
Since 2012, more than 40 drivers who worked for California Cartage affiliates have filed wage complaints and lawsuits in civil court.
Reyes Castellanos, a driver for K&R Transportation, a division of California Cartage, took home only $21,000 of his $94,000 gross income in 2015 after making his truck payments to his employer, according to his tax returns. He had to choose between making house payments and buying food.
“So we lost the house,” Castellanos said. “I lost the house.”
NFI Industries, which recently bought the California Cartage family of companies, said the company doesn’t have a contract with the Defense Department and it requires its subsidiaries to follow labor laws.
“To the extent we discover that any Cal Cartage operation is not in compliance with applicable laws,” spokesperson Amber Burruezo said in a statement, “we will work quickly to correct such non-compliance.”