Call or email us anytime
(805) 484-0333
Search Guide
Today is Friday, March 24, 2023 -

Industry Insights

Uribarri: AB 5 Still Creating Headaches for Trucking Industry

  • State: California
  • -  0 shares

While California has a long history of extending new rights to employees, not all legislation has the overall intended effect. The passage of Assembly Bill 5 in 2019 is a prime example.

Jemma Uribarri

Jemma S. Uribarri

After being signed by Gov. Gavin Newsom into law on September 2019, AB 5 took effect as of Jan. 1, 2020. The new law required companies to reclassify independent contractors as employees unless the employer could prove that the worker met the three-part “ABC test” established by the California Supreme Court in Dynamex Operations West Inc.

This test requires that the alleged employer must show the following to prove that the worker is in fact an independent contractor:

  • The worker is free to perform services without the control or direction of the company.
  • The worker is performing work tasks that are outside the usual course of the company’s business activities.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

If the employer cannot prove those three criteria, then the worker is classified as an employee under Dynamex and AB 5. If the employer can prove those three criteria, then the worker is classified as an independent contractor.

AB 5 was initially intended to capture all gig-based workers and reclassify them as employees, particularly app-based drivers. However, following the effective date of AB 5, the primary providers of app-based services strongly supported Proposition 22, which ultimately excluded app-based workers from the provisions of AB 5. In other words, the passage of Prop. 22 meant that your Postmates driver was excluded from being an employee under AB 5.

Further exclusions from AB 5 were granted through AB 2257, which provided exemptions for various categories of workers, including content contributors, translators, fine artists and more.

Prop. 22 did not exclude truckers from AB 5

One sector particularly affected by and NOT excluded from the provisions of AB 5 is California’s trucking industry. Many feel that the second prong of the three-part test is problematic for trucking companies, as it requires that an independent contractor must perform work tasks that are outside the usual course of the company’s business activities.

Following the decision in Dynamex, the California Trucking Association filed a lawsuit against the state, seeking a declaration that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempted Dynamex’s ABC test from being applied to motor carriers. Following enactment of AB 5, a second amended complaint was filed in this matter, contending that the FAAAA preempts AB 5 as well. As a result, the District Court enjoined the state from enforcing AB 5 against motor carriers doing business in California.

However, this injunction was appealed and ultimately reversed by the 9th Circuit Court of Appeals (see California Trucking Association v. Bonta). The U.S. Supreme Court denied certiorari on July 13, 2022, thus lifting the injunction against enforcement of AB 5 for the trucking industry.

In summary, when the U.S. Supreme Court lifted the injunction, that meant AB 5 now applies to truckers again.

AB 5’s impacts on trucking industry

So, what exactly is the problem with AB 5 now affecting the trucking industry?

Its provisions grant workers the rights of employees, including entitlement to minimum wage, expense reimbursements, health insurance, rest breaks and other benefits required under California law.

These benefits come at a cost, which is one that trucking companies are not prepared to cover. This leaves out-of-state trucking companies with the option to pass the costs on (ultimately to the consumer) or stop utilizing owner-operators who reside in California. In-state companies may determine it is in their best interest to move their base of operations out of state.

The result of these options is an increase in consumer costs at a time when inflation is already driving costs, reduction in the employability of California owner-operators and increased supply chain problems. While the lifting of the injunction does not end the CTA’s lawsuit on this issue, the effects of AB 5 will continue to be felt by trucking companies while litigation is ongoing.

Conclusion

Assembly Bill 5 is currently applicable to trucking companies and arguably changes the classification of many more truckers as employees (instead of independent contractors) in the eyes of the law. All hope is not lost, though, as the California Trucking Association’s legal battle is not over. The CTA will continue to litigate the matter in hopes of overturning AB 5.

Jemma S. Uribarri is a partner at the Law Offices of Bradford & Barthel’s Ontario office. This entry from Bradford & Barthel's blog appears with permission.

No Comments

Log in to post a comment

Close


Do not post libelous remarks. You are solely responsible for the postings you input. By posting here you agree to hold harmless and indemnify WorkCompCentral for any damages and actions your post may cause.

Advertisements

Upcoming Events

  • Mar 23-24, 2023

    DWC Annual Educational Confere

    The California Division of Workers Compensation (DWC) is pleased to announce that registration fo …

  • Mar 24-26, 2023

    2023 WILG LONGSHORE CONFERENC

    Are you a claimant attorney trying to tread the treacherous waters of representing your clients un …

  • Mar 29 – Apr 1, 2023

    CLM Annual Conference

    Launch into 2023and beyondat our industry-leading event Are you ready to future-proof your care …

Workers' Compensation Events

Social Media Links


WorkCompCentral
c/o Business Insurance Holdings, Inc.
PO Box 1010
Greenwich, CT 06836
(805) 484-0333