The ABC of AB5 spells trouble for trucking

John G Smith

It seems Canadian regulators are not alone in raising concerns about misclassified truck drivers.

But while the focus on this side of the border involves cracking down on Driver Inc. — fleets that sidestep employer-related obligations by purposefully misclassifying drivers as independent contractors – the California Trucking Association (CTA) is in the midst of a decidedly different battle.

The California association wants to stop the state from classifying independent contractors as employees.

court gavel
(Photo: iStock)

California Assembly Bill 5 (AB5) was introduced to help protect workers in the “gig economy”, such as those who drive for ridesharing services like Uber and Lyft. The problem is that the underlying test used to define an independent contractor would essentially make it impossible to work as an independent owner-operator in trucking.

To be an independent contractor in California, the rules now require a worker to:

  • A – be free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • B — perform work that is outside the usual course of the hiring entity’s business, and;
  • C — be customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Not surprisingly, the second measure is a significant challenge. Independent owner-operators in trucking are, well, involved in trucking. So are the fleets that engage their services. In the words of the Owner-Operator Independent Drivers Association (OOIDA), the test will cause “irreparable harm” to thousands of truckers. The CTA is warning the rules would force members to eliminate certain routes, and that higher labor costs would put small carriers out of business and force other operations out of the state.

After weaving its way through several court cases, the issue now appears to be heading for nothing less than the U.S. Supreme Court.

The court challenges began when CTA brought forward a lawsuit with owner-operators Ravinder Singh and Thomas Odom. A district court dismissed that case on Sept. 24, 2019. An amended complaint came Nov. 12, 2018, and a district court said CTA was likely to succeed on the merits of the claim, and kept the state from enforcing AB-5 against any motor carrier.

But a three-judge panel with the U.S. Court of Appeals for the Ninth Circuit ruled in a 2-1 decision on April 28 that AB5 is a labor law, and it turned down a request to lift a preliminary injunction. So, too, did the court turn down a request to revisit the issue under an “en banc” hearing that would be heard by the entire bench rather than a single judge or panel of judges.

The latter ruling on June 21 threatened to dissolve the injunction within seven days, but on June 23 the CTA secured a stay for the trucking industry while it petitions the U.S. Supreme Court. For fleets that use owner-operators, it’s business as usual. For now.

In a particularly unusual twist, the CTA’s argument is anchored in an aviation-related law. The association says AB5 would violate the Federal Aviation Administration Authorization Act of 1994 (FA4), which in part prevents states from enforcing regulations relating to a price, route or service. It pre-empts any state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property.”

California’s goal of protecting gig workers is admirable. Too many businesses are built on models that fail to protect employees. Canada’s Driver Inc. model is a clear example of that.

But by failing to recognize the way trucking works, the ABC test in California’s AB5 spells trouble for the state’s entire industry.

Let’s hope the U.S. Supreme Court sees it the same way.

 

 

 

 

 

 

 

 

 

John G Smith

John G. Smith is the editorial director of Newcom Media's trucking and supply chain publications -- including Today's Trucking, trucknews.com, TruckTech, Transport Routier, Inside Logistics, Solid Waste & Recycling, and Road Today. The award-winning journalist has covered the trucking industry since 1995.

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  • As the editorial director, you need to hire better editors. You are quoting law, and spelling it wrong!
    Second paragraph, first point; “…of the work, bot under the contract…”.

    I have read that the state’s [California] authority to regulate interstate trucking is also in question. This is likely in reference to the FAA ruling that you mention. As I understand it, some time ago the 1st Circuit court ruled that the state, Maine in this case I believe, does not have the authority to regulate interstate traffic even within the borders of its own state, and that federal law preempts state law.

    This puts the 1st and 9th Circuits at odds over interpretation of the rule of law and as such the Supreme Court of the United States (SCOTUS) must, by law, hear the arguments. SCOTUS will have to side with one or the other.

    If SCOTUS sides with the 1st Circuit, then AB5 is dead, but don’t believe for a moment that California will stop there, at least until there is a major shift in government policy in California.

    However, that is not nearly as daunting than if SCOTUS sides with the 9th Circuit. If that happens the owner-operator model as we know it today is dead in California, and on its death bed in every other state, and perhaps Canada as well.

    It is sad to say, but it is highly likely that Canada will pounce on AB5 like it was carved on a stone tablet and carried down the mountain by Moses himself if for no other reason than this … It solves the Driver Inc. problem.

    • We should make all O T R lease ops at least $27.50 per hour on payroll. Also local lease ops ( city) $23.60 per hour on payroll the balance plus fuel plus insurance to be paid to a separate account for any one using a E -log in Canada. This would ensure that sick or injured truck drivers do not end up as often in homeless shelters.

  • Thanks for a well written and balanced article. I believe your readers would benefit from knowing that the bill ended up not protecting gig industry workers (uber & lyft) as advertised as a result of Proposition 22. What AB 5 did do was ensnare many legitimate small businesses.

  • They want to do something worth doing leave thectruckers the hell alone. If you have missed it or forgotten it is The truckers of this country ” The Backbone of America” that actually keep this country going. We bail you out when you mess up. We come get you, save your asses after all disasters both natural and man made or just plain stupid made, supply your every single solitary need, want, desire, of every kind. So STOP with the bullshot you know absolutely nothing about. We have just about had all we will tolerate from John q public in general as well as the idiots that make up FMCSA. WORD!!!!