October 4, 2022 / By Erika / Logistic • Transport • Trucking / 0 Comments
New California law adds a little chaos to truckers’ lives coast to coast.
Are independent owner-operators and drivers lease-independent contractors, or are they really employees under another name?
That’s the question posed by AB5, a controversial California law that has other states eyeing similar measures. Now that the law has passed a Supreme Court challenge, organizations like the TIA are studying the effect the ruling might have across the transportation industry.
It Started with Uber
AB5 was originally designed as a way to give gig drivers, like those working for Uber, Lyft, DoorDash, and similar app-based services, a fair shake. It codified the “ABC test” for determining if a driver was an independent contractor or an employee. You count as an employee – with all the obligations that entail – unless the company that hires you can prove:
- You’re “free of the control and direction of the employer in performing work”; in other words, you’re not subject to hands-on supervision.
- The work you do is outside the usual course of the employer’s business.
- You’re already working in an independently established trade, occupation, or business of the same nature as the work performed for the employer.
For Uber drivers and the like, the law meant a chance at unemployment insurance, health insurance, sick leave, minimum wage, and everything that goes with a regular job. It went into effect on January 1, 2020.
By November, the ride-share companies had sponsored their own law, Proposition 22, that overrode AB5 and specified that app-based drivers were independent contractors (though it did kick in some health-care subsidies and accident insurance for them).
But other independent contractors – and especially other drivers – were left out.
No Dice In Court
The California Trucking Association challenged the law and ultimately tried to bring its case before the U.S. Supreme Court, but the court declined to consider it, issuing a denial without comment this summer.
Different versions of the law passed in Massachusetts and New Jersey attracted similar challenges from groups representing freelance journalists and photographers, saying that a law declaring them employees was a limit on their freedom of speech, but those arguments got no further.
For now, the CTA case is back in a California district court, and the state was trying to have the Owner-Operator Independent Drivers Association (OOIDA) removed from it. The CTA and OOIDA replied with a joint statement saying, among other things, “It makes no sense that the State would oppose the participation of the nation’s largest and oldest organization representing small-business truck drivers in a lawsuit that harms tens of thousands of OOIDA’s members.”
That was in September. At the time this article is being written, it seems likely the court arguments will continue – but the law is already in effect.
For now, TIA Board Vice Chair Mark Christos is heading up an “AB5 Task Force” looking into three possible impacts the law might have: first, on how brokers will now relate to owner-operators in California; second, on how agents used by brokers will be affected; and third, what broad effects the law will have on California’s cargo-carrying capacity.
The TIA also brought up the wider legal picture in Policy Forum in Washington, D.C. this September, as a part of what they’re calling “supply chain sustainability.” Our President Mark Fiorini attended the forum and is committed to being involved in these critical policy meetings. They’re hoping to get lawmakers to review how dozens of outdated or mismatched regulations are actually shaping the way things get moved from point A to point B.
For owner-operators and other independent contractors, as well as for the motor carriers who hire them, things are still somewhat in the air. Will brokers suddenly have to become employers if their drivers enter California (or Massachusetts, or New Jersey)? Can California-based motor carriers and owner-operators survive what the CTA has called “the costs and burdens associated with shifting to an employer-employee business model”? How will those “costs and burdens” affect prices and plans up and down the supply chain?
Unfortunately, those answers remain to be seen.
As Always, Westgate Global Logistics Will Keep You Informed On Industry Issues. We Encourage You To Evaluate Your Business, And If You Have Any Questions, CONTACT US To Discuss Your Transportation Needs.
Since this article was written, the U.S. Department of Labor has proposed a national regulation similar to AB5.