Update on AB-5: What it Means for Trucking in CA

Under the California Assembly Bill 5, the state of California attempted to regulate the use of gig workers. This gig worker bill went into effect on January 1, 2020, requiring companies to use independent contractors to reclassify these employees. Drivers for app-based ridesharing and delivery services escaped this provision due to Proposition 22. However, the trucking industry has not seen the same relief with such certainty. Owner-operators and motor carriers have limited options once AB-5 goes into full effect.    

The Impact of AB-5 on the Trucking Industry    

The classification of independent contractors changed with AB-5.  Additionally, previous tests to classify owner-operators were simple to pass. In contrast to the 11-prong Borello test, the new standard to be applied to truckers is a three-prong test that has these requirements:    

  1. An individual is free from the direction and control of the hiring agency concerning work performance.    
  1. The individual performs work that the business would consider outside the normal scope of operations.     
  1. An individual is generally engaged in an independent trade, business, or occupation of similar stature.    

The second stipulation often causes the most trouble for truckers.  Furthermore, it changes the where and what of a trucker’s operations. If the pause on AB-5 ends, both owner-operators and motor carriers will have to make difficult decisions to continue doing business. These would include employing owner-operators, moving out of California, or deadheading out of California carrying the required bobtail truck insurance. Employers could regulate the continue to regulate the use of gig workers, or restructure completely. Thus, many drivers might have to seek a different line of work or take their services out of state.    

There is already a severe shortage of trucker drivers. Likewise, any oppressive legislation will further this crisis. Legislators initially passed the bill to address the practices of companies like DoorDash, Lyft, and Uber. However, the unintended consequences could cause a complete breakdown in logistics and commerce across the state. Then, this may lead to heavier ramifications across the country.    

The Recent AB-5 Updates    

Many businesses across the state did not like the original legislation. They enjoyed the ability to regulate gig workers, saving on costs. Moreover, Lyft and Uber fought back and assisted in passing Proposition 22. It provided baseline benefits to workers and allowed exemptions from the reclassification order. That isn’t the only change since the passing of the original bill. Additionally, some updates continue to impact the trucking industry. Two months before Prop 22 was voted on and passed by Californian residents, Governor Newson signed AB 2257 into law.    

This updated version of the changed who can be exempt from the three-prong test established by the original bill. Under the updates, there is a new list of occupations eligible to retain status as freelancers. These include:    

  • Home inspectors    
  • Real estate appraisers    
  • Illustrators    
  • Copy editors    
  • Translators    
  • Architects    
  • Performing or recording artists    

Legal Action    

After the passing of AB-5, the California Trucking Association took the state to court for claims of violating the Federal Aviation Administration Authorization Act. It is a federal law that prevents a state from interfering with the price, route, or service that motor carriers provide. An injunction was handed down pending the case, but the state appealed the injunction. After a legal battle, the injunction was overturned by a three-panel judge and ultimately, in a two to one vote, found that AB-5 wasn’t in conflict with F4A legislation. The CTA appealed the decision to the Supreme Court, and the injunction came back.    

Reviewing the Bill  

Not all cases brought before the Supreme Court gets reviewed, but fortunately, the issue involving F4A has gained the court’s attention. Though the case brought by the trucking association is essential for the state of California, there are two other cases invoking the use of F4A, which may be the reason behind the Supreme Court’s interest. Until the Supreme Court decides if it will review the case, the injunction against AB-5 remains. If the Supreme Court denies a review, the bill will go into immediate effect.    

How AB-5 Updates Impact Truckers    

The temporary hold on AB-5 gave the trucking industry and many other independent contractors time to think about the provisions. Should AB-5 remain in place, companies relying on independent contractors would have to reclassify these workers and provide them with rest breaks, minimum wage, expense reimbursements, employee benefits, and overtime pay. Consequently, these are benefits to many, but there are also downsides to losing autonomy within the trucking industry.    

Pros and Cons    

Motor carriers don’t employ drivers or own their own trucks. These companies work with owner-operator truck drivers and contract these individuals for things for the transport of goods. The bill threatened this business structure, potentially putting many companies out of business or forced to restructure at high costs. In addition, AB5 made it harder for trucking across state lines. Motor carriers would have to transfer shipments to drivers employed by trucking companies to enter the state. Also, they may have to reconfigure routes.    

Should AB-5 remain in place, it could present earning opportunities for truckers as any loading and unloading periods would be paid. There would be more excellent protection against unemployment. Additionally, truckers would receive healthcare.    

California is still waiting for an answer concerning the legality of AB-5. Truckers can continue as usual until the Supreme Court decides the suit filed by the California Trucking Association. 

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. Contact us today at (800) 937-8785 to learn more!  

 

AB-5 Update: Construction Truckers Covered

In the ongoing legal battle surrounding California’s controversial AB-5 decision, which reclassifies truck drivers among other things, regional transportation associations have been looking for some guidance. The state’s Attorney general, trucking companies, independent trucking contractors, and Uber and Lyft are all involved in the matter, as all are trying to find common ground when it comes to classifying employees and obtaining the right benefits and insurance coverage.

But in recent weeks, the Western States Trucking Association, a non-profit trucking association that helps protects the rights of trucking companies, scored a major win against the AB-5 California mandate by forcing the government to renounce the plain language involved in the bill, and instead agree to treat construction trucking like all other motor carriers. While this AB-5 Win may seem small, it’s a step in the right direction for everyone from truckers to the companies they work for in the state.

As a result of this decision, all members of the construction trucking industry, a major player in the state’s economy, are now fully protected by the injunction against the ABC testing, which reclassifies workers.

The Dynamex Decision

In 2018, the Supreme Court of Los Angeles set the foundation for AB-5, which spurred on legislation that reclassified trucking professionals as employees instead of independent contractors. AB-5 codified the Dynamex decision and applied a test to any industry that was not given an exception in the law. Some of the exceptions included wholesale exemptions, meaning they could still use the traditional test.

However, only construction trucking was singled out for an exception that was worse than the ABC test itself. Under the terms of AB-5, construction trucking was called out to mandate an employment relationship between trucking independent contractors. Any time a trucking company sought to subcontract some or all of the construction trucking work on a particular construction trucking job, whether by using independent truckers or other trucking companies, they would be deemed the employers for all trucks working on that job.

The order now targeting WSTA’s complaint highlights that in light of the state’s interpretation of the law, their trucking members have no threat of something hanging over their heads when it comes to prosecution under the challenged provisions. As a result, WSTA members and construction trucking drivers are subject to the ABC test like everyone in the industry and are protected from the enforcement of the test.

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. Contact us today at (800) 937-8785 to learn more.

AB-5 Legislation Update

The state of California has asked a federal court to begin lifting the preliminary junction against imposing AB-5 on the state’s trucking industry. The requests to the Court of Appeals for the state’s 9th Circuit is part of the appeal of the attempt by the California Trucking Association (CTA) to be granted an injunction against the position that AB-5 has put the trucking industry in.

The state’s AB-5 Legislation has been a topic of controversy for over a year now. What it does is move 2018’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.

According to the appeal by the attorney general’s office, the law set in place by the FAA in the early 90s “preempts state and local regulation that has a significant effect on the prices, routes or services of motor carriers.” This has been the position of the CTA as well and a case they have been trying to make since AB-5 began picking up steam last year.

The state’s appeal is mostly looking at the prices, routes, and services, as mentioned above, in the preliminary injunction. The state cited legal precedents that it said should be looked at as meaning that state labor regulations are not preempted by the Federal Aviation’s act.

Independent Contractors and Trucking Companies

If the argument that AB-5 doesn’t entirely ban the hiring of independent contractors as truck drivers by a company, the state’s argument stays focused on prices, routes, and services. The test brought on by AB-5, the ABC test, and the earlier standard used to decide if someone is a full-time employee or a contractor do not define the rights or benefits that a trucking carrier has to provide its drivers.

The state went on to argue that the decision to grant the injunction then offers no “substantive analysis on what impact labeling motor carriers’ drivers to be ‘employees’ will have on prices, routes, and services”. The state argues that what might be seen as a hurried nature of the CTA action is reason enough to overturn the injunction.

The state’s filing says the ABC test became a reality for trucking companies and their drivers with the Dynamex decision, which was put into place in April of 2018. However, the injunction wasn’t put into motion until December of 2019, plenty of time for the plaintiffs to seek injunctive relief during that time period.

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. Contact us today at (800) 937-8785 to learn more!