An Overview of California AB5 Legal Changes for Truckers

California’s controversial new law aimed at reclassifying gig workers as employees – entitled to employee benefits – is facing serious opposition from businesses and workers alike, including those in the trucking industry.

Trucking companies in the Golden State rely on some 70,000 independent contractors to drive for them, a 2019 report by Reuters news service said. If they are forced under Assembly Bill 5 to hire the drivers and provide them benefits, many argue the extra costs will cripple their businesses.

As a result, the California Trucking Association filed a lawsuit against the state over the new law. A federal judge later granted a preliminary injunction to block the state from enforcing it against “motor carriers.” Both sides have continued the legal wrangling and the U.S. Court of Appeals for the Ninth Circuit is scheduled to hold a hearing on the matter in September.

What Is the California AB5 Trucking Law?

California Assembly Bill 5, or AB5, came in response to the precedent set by a 2018 state Supreme Court ruling regarding independent contractors between Dynamex Operations West, Inc., and the Superior Court of Los Angeles. The court decision, which has also become known as the Dynamex Standard or the Dynamex Decision, established a new standard by which workers would be classified as independent contractors or employees. The standard is much more restrictive than the original test for establishing whether a worker is an employee.

In passing AB5, California legislators turned that standard into law. It was passed in 2019 and went into effect on January 1, 2020.

According to California AB5, a worker must be considered an employee unless the business that is hiring that worker can demonstrate three things:

• That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
• That the worker performs work that is outside the usual course of the hiring entity’s business.
• That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

What Are the California AB5 Exemptions?

State lawmakers included a number of exemptions to AB5 for specific types of work and workers. According to the National Federation of Independent Business, those working in the following occupations are exempt from the new measure: doctors, surgeons, dentists, podiatrists, psychologists, and veterinarians performing professional or medical services provided to a health care entity; lawyers, insurance brokers, architects, engineers, private investigators, and accountants; securities brokers/dealers or investment advisers and their agents and representatives who are registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority or the State of California; real estate agents, repossession agencies, direct-sales persons, commercial fishermen; and those performing services under a contract with a licensed motor club.

The law also set aside exceptions for those who provide professional services – as long as they meet specific parameters – including marketing, human resources, payment processing and tax preparation professionals. Travel agents, graphic designers, fine artists, writers, barbers, cosmetologists and estheticians, electrologists and manicurists can also be exempt under the professional services allowance, the National Federation of Independent Business says.

Construction subcontractors, referral services and some other direct business-to-business operators can also qualify for exemption.

Who Is Affected by the New Law?

California AB5 is directed at workers in the gig economy. Rideshare drivers and food delivery people are most often cited as among those the law is meant to help, but it affects any worker who labors for a company without being formally hired by that company as an employee in the traditional sense.

Advocates for the measure argued AB5 would limit a company’s ability to shortchange workers by reaping the benefits of their labor without having to compensate them the same way they do traditional employees.

Opponents claim the added cost of fully employing the freelance workers would create a burden heavy enough to hurt many businesses and, in turn, the economy.

How Have Truck Drivers Responded to California AB5?

Truck drivers and trucking companies have watched the evolution of California AB5 and voiced concerns since its proposal, worried that freelancers would end up losing jobs to drivers in other states without the strict employment regulations.

The California Trucking Association took its objections to court, filing a lawsuit against the state saying the Federal Aviation Administration Authorization Act of 1994 supersedes AB5. The federal act prevents states from enforcing a law or regulation related to the price, route or service of “motor carriers.”

“Until now, motor carriers could choose between providing services with employee drivers or with independent owner-operators. No longer,” said the CTA.

Association officials told Eyewitness News in Bakersfield in December 2019 they were already seeing negative effects from AB5. The feedback they were getting from members indicated many of the drivers would have to leave their homes in California because the carriers they had long worked for as independent contractors would not hire them as actual employees.

At least one major trucking company, Prime Inc, “offered relocation packages to its 6,000 California truck drivers, according to trucking consultant and CTA member, Bill Burgemaster,” Eyewitness News reported.

The Owner-Operator Independent Drivers Association (OOIDA) has come out against Assembly Bill 5 and participated in efforts to block its enforcement in recent months.

In an online statement to its members before AB5 took effect, the OOIDA renewed its opposition to the law. And after the California Trucking Association filed its lawsuit, the owner-operator group filed a legal brief in support of the injunction preventing state officials from enforcing AB5 against the industry, it reported on its website Land Line.

The owner-operators group argues that small trucking companies will suffer alongside large lucrative ones and the regulations might put them out of business entirely.

“For tens of thousands of interstate owner-operators and small-business motor carriers that regularly cross the California border,­ small-business truckers critical to the interstate motor carrier industry, AB5 could be fatal,” the group said in its brief.

The CTA also warned about the future of trucking in California and what it will mean for those living in the Golden State. AB5 “will also constrict services in other ways as motor carriers respond to losing the owner-operator model,” the CTA warned. “Some motor carriers will abandon California altogether, as some already have done. Fewer motor carriers means reduced competition, higher prices, and fewer services in the California market.”

What’s Next for Truck Drivers?

For now, the courts are preventing California officials from enforcing Assembly Bill 5 against the commercial trucking industry. However, the U.S. Court of Appeals for the Ninth Circuit in San Francisco began hearing arguments in the California Trucking Association’s case to extend the injunction against the enforcement of Assembly Bill on Sept. 1. The first hearing took 45 minutes, and is available online for the public to view.

The three member panel involved in the hearing raised questions, such as whether California AB5 is an all or nothing bill, or if it contains some room for interpretation. Two of the three justices also questioned the reasoning behind the injunction blocking California from currently enforcing the bill, leading some to believe that the court may overturn the decision.

Also in September 2020, the U.S. Department of Labor announced a proposed addition to the rules already in place for determining whether a worker is an independent contractor or an employee. The proposed rule would help to clarify who is entitled to the privileges afforded to employees under the Fair Labor Standards Act, by including an economic reality test in the criteria for determining classification.

This economic reality test would consider whether the worker is dependent on their employer for work, or whether they operate their own business. It would also consider the level of control the worker has over their work, as well as their opportunities for profit or loss depending on their own investment and initiative. The proposed rule would also take into account the amount of skill required to perform the work, and whether the relationship between the worker and the employer is temporary or permanent.

The public can comment on the proposed new rule until Oct. 25, 2020.

Filing a Wage and Hour Lawsuit

A growing number of truckers are coming forward with various wage and hour claims, such as misclassification, failure to honor the terms of their contracts, and more. If you work or have worked as a truck driver and believe the company you work for has failed to pay proper minimum wage and/or overtime, you may be able to file a lawsuit and pursue compensation.

Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

Join a Free Trucker Overtime Class Action Lawsuit Investigation

If you have worked as a contract truck driver and believe your carrier has failed to pay you minimum wage or overtime, or otherwise might not have honored a contract with you, you may qualify to file a truck driver lawsuit or class action lawsuit.

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