How Does AB5 Affect Truck Drivers? 

Last year, legislators in the state of California passed Assembly Bill 5, or AB5, in an effort to protect workers who previously had been unfairly labeled independent contractors.

AB5, commonly referred to as the “gig worker bill”, requires employers to reclassify these independent contractors as employees and treat them as such.

However, the bill has faced considerable push back from industries and entities that frequently rely on or represent independent contracting. The California Trucking Association (CTA), for instance, has been awarded a preliminary injunction barring the enforcement of AB5.

What Is AB5 Legislation?

AB5 was signed in to law by California Governor Gavin Newsom in September 2019, but it legally went into effect on Jan. 1, 2020. According to Investopedia, the law was written to provide gig workers with more rights and benefits. Specifically, employees are guaranteed a minimum wage, employee benefits, expense reimbursements, rest breaks, overtime pay, and other benefits not guaranteed for independent contractors.

The bill got its start in a 2018 California Supreme Court decision in the case of Dynamex Operation West v. Superior Court. The decision established a new, stricter test for determining whether or not a worker should be classified as an independent contractor known as the ABC-test.

Under AB5, companies are required to determine whether or not their workers should be classified as employees based on the characteristics of their work. A worker can be classified as an independent contractor only if the following three statements are true:

• The worker performs duties or services without the direct control or direction of the company.
• The worker performs tasks and services that fall outside of the usual course of the employing company’s business activities.
• The worker regularly performs independent services similar to those which they perform for the employing company.

These standards are higher than those previously established in California labor laws. If a worker doesn’t meet the above three requirements, then they must be classified or reclassified as an employee and must be provided all of the benefits and rights that classification entails.

Who Is Affected by AB5 Legislation?

AB5 legislation is likely to affect any businesses that rely on independent contract work in the state of California. This includes companies like Uber, Lyft, and DoorDash. In fact, The Outline reports that Uber and Lyft have pledged to spend $90 million on a fight against the bill. The companies argued that providing minimum wage and other benefits to employees would pose a risk to their businesses.

However, the impact of AB5 reaches far beyond ridesharing apps. Contract workers from chiropractors to freelance writers have been affected. Many of these groups are now seeking special exemptions for their type of work. Groups included in suits seeking exemptions include writers, opera singers, mall Santas, and fitness instructors. Exempt workers include dentists, doctors, lawyers, accountants, insurance agents, real estate agents, securities brokers, hairstylists, and creative professionals.

What Are the Advantages and Disadvantages of AB5 for Workers?

AB5 brings with it many advantages for workers in the state of California. The key advantage comes in the form of added benefits for contractors who become employees via the ABC-test. Reclassification will guarantee those workers several rights not guaranteed to contractors.

Unlike employees, workers who are classified as independent contractors are not covered by many employment laws. They may not be entitled to receive minimum wage or overtime pay. They are also not entitled to benefits such as their employer withholding their payroll taxes or making contributions to Medicare. They are often not afforded medical coverage through their employer, or granted rest or meal breaks.

AB5 is also intended to help even the playing field between gig workers and those hired as regular employees. Prior to AB5 reclassification, gig workers are often forced to shoulder responsibilities that would otherwise be taken care of by a traditional worker’s employer, as reported by The Outline. These costs might come in the form of unpaid breaks or a lack of medical insurance.

Other costs may come in the form of having to pay the costs of purchasing and maintaining a vehicle that is used for work, or spending their own money on tools or other items required to do their job.

However, AB5 does have downsides. Gig workers used to a certain amount of autonomy may now be held to higher standards and a new set of rules. For example, workers may no longer be able to choose when and when not to work. This reduction in flexibility may cause some gig workers to leave their jobs rather than conform to a fixed schedule or other rules. Others may choose to leave California rather than their profession.

That being said, just because there is potential for reduced flexibility doesn’t mean that flexibility has to be eliminated altogether. It’s possible that companies and workers will adapt to these changing rules in a way that benefits both. However, some feel it’s likely that companies will take advantage of this new level of control in order to cut costs.

Some of those in favor of AB5 believe that employers are already doing this, and may be purposefully misclassifying workers as independent contractors rather than employees in order to avoid paying out higher wages and benefits. For businesses, the cost of hiring an employee rather than a contractor may be around 30 percent more expensive.

How Does AB5 Affect Truck Drivers?

One group that has come out strongly against AB5 is truckers. Many truckers are employed as independent contractors, and ATBS reports these workers may now find it much harder to work for themselves. According to The Outline, many workers have been forced to drastically change the way they do business in real-time. Others have “functionally lost their jobs” due to the changes in the nature of their work.

As Law360 reports, most motor carriers don’t own trucks or employ drivers. Rather, they work with owner-operator truck drivers. These drivers have traditionally been hired as independent contractors. The majority of the work done by the carrying company is transporting goods; thus these drivers might not be considered independent contractors under AB5. This entire business structure is threatened by the new ABC-test.

AB5 could also complicate trucking that crosses state lines. According to Law360, the CTA argued in court documents that motor carriers would be forced to reconfigure routes or work with owner-operators to transfer their shipments to trucking companies who employ drivers. This whole process could be quite costly for the carriers and the owner-operators.

However, some changes may be good. According to studies on the amount of time truckers spend waiting for their trucks to be loaded or unloaded, truckers spend an average of 2.5 hours waiting at loading docks. This time is often not compensated. Although truckers are entitled to be paid for this time, many of them go uncompensated, and are afraid to ask to be paid. Truckers who work for small companies, or feel insecure in their jobs may be wary of pushing for pay for wait times, out of a desire to remain competitive and desirable to their employers. If truckers were to be classified as employees, rather than contractors, they would have more legal rights when it comes to demanding fair pay.

However, the enforcement of AB5 against truckers was actually halted just hours before the law went into effect. U.S. District Judge Roger Benitez issued a restraining order aimed at preventing officials from enforcing AB5 against motor carriers, according to Trucking Info. That order has since been extended. The restraining order was requested by the California Trucking Association (CTA). The CTA has now filed an answering brief in support of the preliminary injunction.

Have Any AB5 Lawsuits Been Filed?

The majority of the challenges to AB5 have come in the form of lawsuits filed by businesses that rely on contractors and the organizations who represent those contractors. The CTA, Uber, Lyft, and many others have filed litigation. Many of these suits are seeking exemptions for certain employment classes. Others, like that filed by CTA, are challenging the law itself.

In its suit, CTA argues that AB5 is superseded by federal laws restricting states from passing laws regarding motor carriers. The Federal Aviation Administration Authorization Act (FAAA) of 1994 prohibits states from creating laws that affect a motor carrier’s routes, prices, or services.

Another suit partially relying on this argument was filed by the Western States Trucking Association regarding “construction trucking services”. However, according to Law360, Attorney General Xavier Becerra has argued that the Ninth Circuit Court has already found that minimum workplace standards aren’t preempted by FAAA.

On April 28, a panel of three judges ruled that AB5 is a “generally applicable labor law” which could apply to truckers. As a result, the panel called for an end to the current injunction against trucking industry enforcement.

The CTA appealed this ruling but, on June 21, none of the panel judges on the Ninth Circuit Court of Appeals voted to consider the CTA’s case. In a statement to LandLine, CTA CEO Shawn Yadon called this “disappointing” but revealed that the association would petition the U.S. Supreme Court to hear its appeal.

“Enforcing AB5 would throw the nation’s supply chain into further chaos and destroy the livelihoods of thousands of blue collar entrepreneurs,” Yadon said.

If the Ninth Circuit’s determination holds up to Supreme Court scrutiny, independent truck drivers could be empowered to fight for higher wages and better benefits.

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