Judge Blocks AB5 from California Trucking

For those working as independent contractors in California, a lot of news has been swirling around in regards to their worker classification with their clients. From graphic designers to business consultants, a lot of professionals have had to rethink the way they operate under the new AB5 regulation passed at the end of 2019.

But quite possibly the biggest industry impacted by the new bill is the trucking industry, which is literally driven by independent trucking professionals who take one-off jobs delivering payloads from one destination to the next throughout the state. And since California’s economy is fueled by trade and commerce trucked along its highways, AB5 brought plenty of controversy with it.

Now, trucking companies and professionals in the industry can breathe a little easier as a federal judge has extended a temporary restraining order keeping officials from enforcing the terms of AB5.

Truckers Find Support

U.S. District Judge Roger Benitez listened to arguments but didn’t issue a full decision in regards to how AB5 will impact those in the industry. Instead, Benitez extended the temporary restraining order that was put in motion on December 31 and will be in effect until he makes a full-on decision on the preliminary injunction, which could take anywhere from a few days to a few weeks.

Some who oppose AB5 say it unfairly hinders trucking professionals and the companies they work for, affecting everything from tax classification to benefits to commercial truck insurance. Some go even further, pointing out that it may have major constitutional issues in terms of how it impacts goods moved not only throughout California but the entire country.

The ABCs of AB5

The California Trucking Association filed a lawsuit challenging AB5 back in November. The new law put into motion a strict ABC test in order to determine the validity of independent contractors and their relationships with clients, such as trucking companies who hire out truckers. One of the requirements prohibited companies from using independent contractors unless the worker was performing work outside the usual course of the hiring company’s business.

CTA stated that AB5 is preempted by the commerce clauses in the U.S. Constitution and comes in conflict with the Federal Motor Carrier Safety Act as well as the Federal Aviation Administration Authorization Act of 1994, which bans states from enacting laws that have an effect on a motor carrier’s prices or services.

However, while this may be a small victory for trucking professionals and organizations like the CTA, the state government is making efforts to enforce AB5. Governor Gavin Newsom’s proposed 2020 budget includes $20 million in additional funding to make sure AB5 is enforced.

But Newsom and other lawmakers are fighting adversity on multiple fronts as the Western States Trucking Association also filed a complementary suit focused on Ab5 and how it treats motor carriers that provide trucking services. And creative professionals, including freelance writers and photographers, filed their own suit in December, alleging that the new bill restricts the media.

And in a state where technology is not only born (i.e. Silicon Valley startup culture) but fuels the economy, it’s no surprise that app-based tech companies such as Uber and Postmates, which run on the efforts of independent contractors, have filed a similar suit of their own.

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.

California Trucking Association (CTA) Files Legal Complaint Against AB 5

In California, the state’s governor Gavin Newsom spearheaded a complete upheaval of the labor market. Through a slew of new bills passed this fall, California is redefining what it means to be a contract worker and a full-time employee, while simultaneously changing everything from how people get benefits and find the right kind of insurance.

Taking effect on January 1, 2020, California businesses — especially those that rely on contract workers and hired hands, like transportation and creative services — will have to retool their hiring practices and worker classification. One major bill getting the spotlight is AB 5, which is being described as a piece of legislation that could completely disrupt the gig economy in California, a state that relies heavily on contract workers.

One part of that sector that is feeling the pressure is the trucking industry, which fuels the state’s economy through its massive freight operations throughout the state. However, those in the industry are putting up a fight, hoping to find a better solution for workers.

Taking The Case to Court

In a legal complaint filed on November 12, the California Trucking Association (CTA), along with two owner-operators, argues that AB 5 and Dynamex are preempted by federal law and looks to enjoin application of those regulations to the trucking industry as a whole.

The case (California Trucking Association v. Becerra et al.) is currently pending in the U.S. District Court for the Southern District of California. In it, the CTA and the owner-operators on file allege that the new law would make it impossible for CTA’s motor-carrier members to have the same impact in their trucking services due to how it would change the way companies classify truck drivers.

With the current owner-operator model, which hires out drivers as contractors instead of full-time, permanent employees as the new bill would make mandatory, the benefit is that it provides motor-carriers and contractors the flexibility to meet the fluctuating needs of the shipping market.

Testing The Market

The main part of the new bill that has come under scrutiny is the ABC test, which categorizes drivers as employees of a company rather than independent contractors. Under the new test, an individual is classified as an employee, full-time, unless the employer can prove that:

  • A. the worker is free from the company’s control
  • B. the worker performs work that isn’t central to the company’s business
  • C. the worker has an independent business, trade or occupation in the industry

The CTA alleges that the test will prohibit the traditional owner-operator model the trucking industry has relied on. This, the CTA says, will bring economic hardship to not only truck drivers and trucking companies but the businesses they work with in trucking commodities, such as perishables, throughout the state.

The CTA is trying to address the long-term effects that the new bill would have on the industry and the individuals within it before the January 1 effective date. AB 5’s complete overturn of the trucking industry requires more time and planning from trucking companies to raise the capital to hire drivers and purchase trucks and tools, not to mention take care of benefits and truck insurance.

Right now, the plan is to move forward with ABC testing and classification in a state that relies heavily on independent contractors. The reality is that hundreds of thousands of independent contractors in the state will turn into employees overnight under the bill. Beyond trucking professionals, everyone from dancers to writers to bartenders will be impacted in some way.

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.

California Truckers Protested AB 5 Last Month

Earlier this year, the state of California set into motion a new piece of legislation aimed at redefining independent contractors, a rising professional landscape in a state where freight, trucking, and the gig economy are growing. Known as the “gig worker bill,” this puts truck drivers in a bad spot because under a new worker classification test (ABC Test), a worker is presumed to be an employee, putting the burden on the company that hires them out.

This has upset everything from commercial truck insurance policies, such as truck liability, to Uber drivers to the future status of trucking commodities across the state. More specifically, it’s caused truck drivers to speak out in protest due to its limiting of independent contractors.

In fact, truck drivers took to the streets in November, protesting the new legislation and how it’s affected their hauls from Oakland to Los Angeles to the ports of San Francisco and Long Beach. Truck horns and chants could be heard at all these locations last month, as dozens of truck owner-operators gathered together to protect the gig-work law, which could take away their independent contractor status and, in turn, hurt their potential to be their own boss and earn higher wages.

Set to take effect on January 1, 2020, the AB5 bill creates more challenges for classifying someone as a contractor unless they are free from a company’s control and have their own independent enterprise doing the same kind of work. Protests were coordinated throughout the state by many trucking professionals who feel they are being mistreated by the state. The effort has no affiliation with a specific association, but has picked up steam throughout the state.

Currently, there are more than 70,000 drivers who choose to work as independent operators in the state because of the freedom given to them through the work-model that has been in place for decades. These workers are campaigning for an amendment to the AB5 bill, allowing them to work as independent contractors and set their own hours and earn more compensation.

The state is currently in a shortfall of employee drivers and barring the use of independent operators can only hurt the situation, some say. Some companies are considering separating their brokerage operations from their trucking business. This would make carriers responsible for handling operations with owner-operators through the broker.

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.

California Courts Declare Dynamex Ruling Applies Retroactively

In California, the state’s Court of Appeal came to the conclusion that the state’s Supreme Court Dynamex decision was to be applied retroactively. The original case from earlier in the year spun off into legislation known as the AB5 bill, which limits the use of classifying workers as independent contractors rather than employees by companies in the state. For those in the trucking and freight industry, it has been anything but well-received as protests have even been planned out in response to the legislation.

The fallout from the Court of Appeal’s decision outlines that employers who rely on independent contractors may now be subject to potential liability claims for wage and hour disputes based on a legal standard that did not exist before April 2018.

For Dynamex, the California Supreme Court brought on a new test to determine whether a worker is considered an employee or an independent contractor. The new test added two new requirements that an employer must meet to establish the worker is, in fact, an independent contractor. To no surprise, employers are arguing that the new standard should only be applied moving forward.

Regardless of how it’s applied, the legislation is causing confusion around how employers should provide or pursue getting commercial truck insurance. Commercial truck insurance has policy limits that apply to specified workers, and having different or fluid classifications is hard to grasp.

In another case in the state, Gonzales v. San Gabriel Transit, Inc., a transportation driver brought a class-action suit on behalf of himself and other freight drivers, expressing that they were misclassified as independent contractors rather than full-on employees. The issue on appeal zeroed-in on whether or not the claim was suitable for class action certification. And while the transit company in question didn’t bring up the issue on appeal, the Court of Appeal initially considered if the Dynamex rule applied retroactively.

In this case, the court concluded that the Dynamex decision indeed applied retroactively based on the fact that it did not establish a new standard. Employers now have potential risk exposure that goes back years now following the decision (the limit is four years as this is the maximum statute of limitations for wage and hour claims).

Now, trucking companies and professionals in the industry are looking to January 1, 2020, the date that the AB-5 bill, spun out from the Dynamex court decision, will take effect. The bill expands on Dynamex, applying the test to all claims coming out of the Labor Code of California. The difference being that the Dynamex decision has been seen as only applying to claims coming from California Wage Orders.

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.

AB-5 Signed Into Law: What That Means for Truck Drivers

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.

AB 5 Passes California State Senate Hearing – What Does this Mean?

In California, the trucking industry is in the middle of a legislative upheaval over certain exemptions and tests for truck drivers on the state’s highways. Legislation that could disrupt the owner-operator trucking model in California is headed to Governor Gavin Newsom’s desk to be signed.

Assembly Bill 5 (AB5) passed the state senate’s Standing Committee on Labor, Public Employment and Retirement by a 4 to 1 vote, opening to door to codify the ABC test for employee status prescribed in the 2018 Dynamex decision.

Supporting the legislation would help to seek to protect workers from employers that attempt to classify them as independent contractors instead of employees. It could also affect the price of ride-sharing apps like Uber and Lyft, which will likely create higher prices for consumers.

What the Bill Is

Under the bill, many workers who are currently under the label of independent contractor would be considered employees. This would make them subject to the state labor laws in California. What’s more, employers would have to pay payroll taxes, provide benefits, overtime, minimum wage, workers’ compensation and, in many cases, also provide the commercial truck insurance.

Opposing the Bill

The bill in its current form would hurt the owner-operators who want to stay independent. The test, which designates employee status in the legislation, provides no leeway for independent truck drivers who work with other trucking companies; including truck brokers. Trucking associations, such as the Western States Trucking Association (WSTA) have come out against the bill. They warn that the liabilities that come from it would hit employers as a result of reclassification and would ultimately lead to many, if not most, refusing to work with owner-operators.

What Happens Now?

Now, the future of the legislation is still a bit hazy. AB5 needs to be taken up by the state Senate’s Appropriations Committee, which won’t happen until later this month after the legislature’s recess is up. From there, the bill would go to the Senate floor for a major vote. If successful there, it then passes on to the Assembly chamber for a concurrence vote.

In the end, if it hurdles over those steps, the bill would then head to Gov. Newsom for signing, although Newsom does have the power to veto. Another hitch is that the bill needs to be passed by September 13 when it would die if not written into law.

Make sure to check back for future updates on this legislation.

About Western Truck Insurance Services

Western Truck Insurance Servicesis 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.