AB5: The Impact on the Trucking Industry’s Ability to Utilize Independent Contractors
In the trucking industry, Assembly Bill 5 (AB5) reclassifies drivers who are currently operating as independent contractors as employees, entitling them to benefits. Under the law, it is assumed that a worker is an employee of a company unless they meet all three conditions outlined in the bill’s ABC test.
The California Trucking Association Pushes Back
Signed into law in 2019 and effective Jan. 1, 2020, the bill has caused increasing controversy. As a result, in September 2020, the California legislature passed Assembly Bill 2257, which was essentially aimed at modifying AB5.
However, the California Trucking Association (CTA), along with other trade organizations, continues to have issues with the law and the way it impacts the trucking industry. As a result, the CTA petitioned the Supreme Court to put AB5 on hold until it could be reviewed further. In June, when the Court denied the CTA’s petition to further challenge the law and declined to hear its appeal, AB5 went into effect for the California trucking industry—altering many transportation companies’ business models.
The CTA continues to argue that AB5’s existing standards are a challenge to comply with and would take an estimated 70,000 independent truckers off U.S. roadways—worsening today’s supply chain issues and log-jammed ports.
Moving Forward
On Aug. 29, 2022, the U.S. District Court for the Southern District of California officially lifted the injunction that exempted California’s trucking industry from the ABC test in AB5. While AB5 remains the law, the industry and trucking groups continue to work with state officials to gain clarity into exactly how and where AB5 will apply.
Currently, the federal district court in California stated that it won’t hold a hearing regarding a new preliminary injunction to block AB5 until May. Unfortunately, that means California’s trucking sector will have to wait for a preliminary injunction to try and prevent enforcement of AB5 in the state until late next spring.
Conclusion
At the moment, AB5 applies only to California. However, legislation similar to AB5 is being considered in many other states. In fact, AB5 is likely to have major implications across the entire trucking industry in the coming year, including the possibility of federally adopted regulations that mirror AB5’s ABC test, which makes the impact of AB5 on trucking industry rates and capacity unclear. It also remains unknown as to just how soon it would impact trucking companies in states other than California.
For more information regarding the status of AB5, visit the CTA website.
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