AB5 And How it Affects Truck Drivers
The Supreme Court did not include the California Trucking Association’s challenge to California’s AB 5 independent contractor law in its latest Order List issued Monday, June 27. This signifies that the Court will not decide whether to hear the case until at least October.
Greg Feary, president of transportation, the legal firm, Scopelitis, said the most likely outcome is that SCOTUS will not release a decision until later this year.
California’s AB 5 is currently on hold for the trucking industry, pending the outcome of this case. If enforced for trucking, the law would effectively ban the traditional leased owner-operator model in the state.
The California Trucking Association said in a statement, “Gasoline has been poured on the fire that is our ongoing supply chain crisis.”
“In addition to the direct impact on California’s 70,000 owner-operators, who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation,” CTA added.
Under the B section of the ABC test, the owner-operator driver will be engaging in work that falls under the normal scope of work of the employer and as a result cannot continue working as an independent contractor. If the Supreme court decides to allow the implementation of this law, the whole business structure of owner-operated truck drivers could crumble.
What is AB 5?
Assembly Bill 5 was originally passed in California in 2019 by Gov. Gavin Newsom and was designed to determine a worker’s status as an independent contractor or an employee.
AB 5 created the presumption that a worker is an employee, rather than an independent contractor unless the hiring business can prove each part (A, B, and C) of the ABC test.
- An independent worker is free from the direct control of the hiring entity.
- The work performed by the worker is outside the usual scope of work of the employer.
- The worker is engaged in a trade that is customary to them as an independent contractor.
Employees, unlike contractors, are legally guaranteed minimum wages, overtime pay, and workers’ compensation benefits.
Who is exempt from AB 5?
In 2020, the California State Legislature passed AB 2257, which expanded the list of exemptions. Between AB 5 and AB 2257, the following workers and professions were exempted from the ABC test:
- professional service contractors who:
(a) maintain their own business location
(b) have a business license.
(c) can set or negotiate their own rates for the services performed.
(d) can set their own hours outside of project completion dates and reasonable business hours.
(e) are customarily engaged in the same type of work performed under contract with another hiring entity or hold themselves out to other potential customers as available to perform the same type of work.
(f) can customarily and regularly exercise discretion and independent judgment in the performance of the services.
- securities broker-dealers or investment advisers
- certain medical professions
- architects
- freelance writers, photographers, photojournalists, videographers, and editors
- performance artists who set their own terms of work
- engineers
- private investigators
- accountants
- individuals who perform underwriting inspections, premium audits, risk management, or loss control work for insurance and financial service industries
- individuals who provide appraisal services
- home inspectors or manufactured housing salespersons
- individuals who are conducting an international exchange visitor program
- competition judges
- direct sales salespersons
- commercial fishermen
- licensed real estate agent
- repossession agent
- subcontractors for construction contractors
- subcontractors for construction trucking services
- individuals performing services for a certified motor club
If you have additional questions about how to prepare for AB 5 taking effect please consult with your lawyer and visit the Labor and Workforce Development Agency.
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