California AB 5 Faces Challenges from Trucker Groups

The classification of workers as independent contractors is becoming increasingly common as more Americans turn to the gig economy for work. While being able to work as a contractor gives workers more freedom in their scheduling and decisions, companies sometimes wrongly classify workers as contractors in order to avoid providing benefits or paying into state social safety net funds. Classifying workers as contractors may also allow businesses to transfer some of its expenses to workers.

In order to combat this practice, the California legislature passed Assembly Bill 5 (California AB 5). California AB 5 was intended to make it harder for California businesses to classify their workers as independent contractors. However, a federal judge granted a temporary restraining order exempting truck drivers from California AB 5, Reuters reports. Many businesses and worker-groups are challenging AB 5 in order to gain exemptions from classifying their workers as employees rather than independent contractors.

California AB 5

California AB 5 was passed in August 2019 and set to take effect Jan. 1, 2020. According to Forbes, the law was the result of the decision reached in a case brought by two Dynamex delivery drivers who alleged that Dynamex had improperly categorized them as independent contractors rather than employees. California AB 5 has stricter criteria for classifying workers as independent contractors.

While Dynamex had classified all of its workers up to that point as employees, in 2004 the company adopted a new system of classifying its workers as independent contractors which allowed them to require drivers to pay for all of their own transportation expenses. Drivers were forced to wear Dynamex uniforms and mark their vehicles with Dynamex logos, all of which they were required to purchase themselves.

Under California AB 5, all workers are assumed to be employees unless proven otherwise by their employer. This was primarily done to ensure that employers abided by California labor and wage laws. Under the new classification process, to prove an employee should be classified as an independent contractor, an employer must prove each of the following:

• The worker is free of direction in the performance of their work by their employer
• The worker performs duties outside of the employer’s usual course of business
• The worker regularly engages in an independently established business of the same nature as the work they do for the employer

If a company can prove each of these, it can classify its workers as independent contractors. This test is known as the ABC test and replaces a more flexible classification test known as the Borello test.

California Trucking Association Challenges AB 5

Many businesses and industries that commonly rely on contract and gig labor have filed lawsuits and other legal challenges to California AB 5. The Western States Trucking Association (WSTA) filed a suit challenging provisions of the law which the WSTA claims are unfair and preempted by other laws. Specifically, the WSTA and other trucking groups have sited the Federal Aviation Administration Authorization Act of 1994 which states that no laws “relating to a price, route, or service of any motor carrier” may be created. However, state lawmakers and other labor groups argue that California AB 5 doesn’t come anywhere near controlling any prices, routes, or services.

The suit brought by the WSTA is much narrower than the one by the California Trucking Association (CTA) challenging AB 5. While a judge did issue a temporary restraining order in the CTA suit, the state has appealed the injunction.

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