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:
- An individual is free from the direction and control of the hiring agency concerning work performance.
- The individual performs work that the business would consider outside the normal scope of operations.
- 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
- Copy editors
- Performing or recording artists
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.
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