Dive Brief:

• California Cartage, a subsidiary of NFI Industries, will vacate its 600,000-square-foot warehouse at the Port of Los Angeles in July, which it has been operating for nearly 60 years, according to multiple reports. 
• The company has been accused of several labor-related legal violations including wage theft derived from misclassification. The U.S. Department of Labor ordered the company to pay $3.5 million in back wages in September.
• The warehouse is California Cartage's only facility at the port, where Target, Walmart, Home Depot, Amazon, Lowe’s, TJ Maxx and Kmart are reportedly customers. The company's nearest warehouse is in Carson, California, and is just over half the size. 

Dive Insight:

California Cartage was embroiled in legal battles with Teamsters, drivers and the City of Los Angeles even before it was acquired by New Jersey-based NFI Industries in 2017.

In the last two years, the California Labor Commissioner ruled against the company and in favor of workers in 12 cases of misclassification — when employers classify full-time workers as independent contractors — totaling $1.4 million in payouts, according to the Los Angeles Business Journal.

The City of Los Angeles and the U.S. Department of Labor have investigated California Cartage's labor practices. Most recently in November, drivers filed minimum wage violation claims with the Office of Wage Standards, claiming the company "fails to pay drivers at least one hour a day, every day," according to a press release.

A U.S. Supreme Court ruling earlier this year did not block contracted truck drivers from filing class-action lawsuits against trucking companies, opening the door for this type of complaint to escalate into a larger lawsuit. 

The company said the move to cease operations is the result of being out of options since it could not reach an agreement with Teamsters, according to multiple reports, but the Teamsters disagree. 

"NFI management has rejected every single effort to resolve outstanding issues raised by port truck drivers and warehouse workers employed at the Wilmington property," Teamsters Port Division Director Fred Potter in a statement. 

It is unclear what will come of the soon-to-be vacant warehouse, but the impact, should it remain empty, will likely be noticeable for shippers as peak season 2019 begins to ramp up in early fall. 

Misclassification of workers is a pervasive issue at U.S. ports, but this action by NFI may produce more urgency to address it, since the result may negatively affect the port's capacity.