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Is a Surcharge the Answer to New Labor Laws in California

Less than truck load shipments to California are about to get a little bit more expensive. Two of the largest LTL trucking companies, ABF Freight Systems and Old Dominion Freight Line, have started charging shippers extra to move freight in and out of California. How much more? Nearly $6-per-shipment. This surcharge comes after California began requiring trucking companies to pay drivers for time spent refueling, on rest breaks and other periods starting this year. These new labor regulations are just the latest requirements truckers must take into account when doing business within the State of California. The rules come at a time when poor demand from shippers is driving down the rates trucking companies can charge, squeezing their profits. In a weak freight market, surcharges are a common way for trucking companies to maintain profits on their more costly routes, said David Ross, an analyst with Stifel Nicolaus.

With the nation’s two largest ports, some of the country’s biggest cities and a population of over 27 million California will always be a lucrative location for organizations involved in the logistics industry. But California is also home to some of the strictest labor protections and environmental standards within the country. These old and new labor regulations, strict environmental standards, long port delays and the already elevated cost of moving freight in California are causing some shippers to look to other ports along the west coast and other states in which to warehouse their inventory.

For more information check out the WSJ article here.