DECEMBER 17, 2019 – In just a few short weeks, a law will go into effect in California that has the potential to put many owner-operators out of business – as well as make it challenging for trucking companies to get the help they need to continue moving freight.
California’s Assembly Bill 5, better known as “AB5” was passed last year in an effort to protect workers by reclassifying many independent contractors as employees. When it goes into effect, drivers for Lyft and Uber, as well as independent hairdressers (among other professionals), will need to be classified as employees for the companies they work – and therefore eligible for employee benefits. But what will be a big win for some in the California workforce, has the potential to wreak havoc in trucking.
The problem, is that the bill has a strict “ABC” test that a hiring company must follow to determine whether or not the person they are working with can be hired as an independent contractor or whether they must be classified as an employee:
- The worker is free from the control and direction of the hiring entity
- The worker performs work that is outside the usual course of the hiring entity business
- The worker is customarily engaged in an independently established trade, occupation and business
It’s the “B” part of this test that has the industry nervous, as owner-operators contracted by larger trucking companies would be performing the same duties as employees of the business. Some believe that as long as the owner operator has an LLC, that they can continue working with the driver as a contractor, but there are still a lot of unknowns that won’t likely be answered until after the New Year. In anticipation of this law and the questions it’s creating for the future of trucking in California, a few large trucking companies have already stopped working with independent contractors in the state.
Although industry associations are pushing for a trucking-specific extension until some of these issues have been ironed out, the state has only issued an extension for independent drivers working in construction. Unless a last-minute extension is granted, the California Trucking Association estimates that 70,000 truckers could be out of work in a few weeks.
We’ll continue following this story as it unfolds and will keep you updated both on the bill as well as its impact on the trucking industry early next year.
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