This past September, California Governor Gavin Newsom signed into law new legislation focused on making things a little more difficult for independent owner-operators, such as truck drivers and gig economy workers, possibly even putting them out of business.
The AB-5 legislation originally passed the California State Assembly back in May and was passed by the state Senate on September 10. What it does is move last year’s Dynamex California Supreme Court decision into law, which established an ABC test to determine the status of an independent contractor that could essentially eliminate the owner-operator model in California, and disrupting everything from investing in commercial truck insurance, such as general liability insurance, and the sharing economy.
Taking effect starting January 1, 2020, those in the trucking industry could find themselves in the crosshairs. So, what does this all mean for trucking professionals?
Trucking Companies and Professionals in AB-5
While there is little proof that trucking professionals and companies have abused the independent contractor model in the state, AB-5 is still in place to essentially paint with a broad brush in banning the use of independent contractors rather than deal with individual abuses.
The state’s trucking industry has been trying to work with legislators to find exceptions for legitimate independent contractors who follow the rules. Many workers are exempted from this ruling, like doctors, dentists, and engineers, but not trucking or gig economy workers, like those working for Lyft or Uber.
The new bill does not necessarily distinguish between a driver who’s an independent contractor under a truck lease-program and someone who owns their own truck. Those opposed to the ruling argue that this essentially destroys the independent contractor model for trucking.
In California, there are more than small 136,000 trucking companies that are locally owned with small fleets and independent drivers who take care of their operations. This means that motor carriers and owner-operators are left in the lurch trying to figure out a strategy for what they can do now.
California is currently experiencing a truck driver shortage, much like the rest of the nation, but maybe even more so, since the state is highly dependent on the flow of goods coming from Mexico or Arizona. The new measure may aggravate the issue at hand by removing thousands of drivers from the road because of de-classifying them.
Currently, there are lawsuits that have been filed to fight the issue and look for ways to exempt these companies and their drivers from the classification. Additionally, companies like Uber, Lyft, and DoorDash, all dependent upon independent contractors, have invested in a collective of $90 million to bring this issue to the ballot during the next voting season.
About Western Truck Insurance Services
Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates, and coverage changes.