Despite ongoing challenges against its root court decision, lawmakers in California are pressing forward with a bill that its opponents say threatens the traditional owner-operator model in the state. The legislation, AB-5, passed the state’s General Assembly last month and now heads to the California Senate, where lawmakers are expected to take up the bill when they return from recess in mid-August.
The legislation would, in effect, bar companies from hiring independent contractors to perform tasks that are part of the business’ core function. For trucking, this means motor carriers would be blocked from leasing with owner-operators as independent contractors — a prevalent model within the industry.
If made law, the bill would amend the state’s labor laws to essentially codify the April 2018 decision made by the state’s Supreme Court in the case of Dynamex Operations vs. Superior Court of Los Angeles, where the so-called “ABC test” unfavorable to current leasing models in trucking for appropriate independent contractor classification was used.
The bill, if passed, “would affirm the horrible outcome of the Dynamex case” for companies utilizing independent contractors in core business functions, said Jason Geller, an attorney for firm Fisher Phillips and the managing partner at the firm’s San Francisco office. Fisher Phillips represents employers, including motor carriers.
What’s more, says Geller, the bill also affirms that the Dynamex decision applies retroactively, meaning carriers could face lawsuits for violations that occurred within the four years prior to the enactment of the law.
Employers across various industries have been successful in convincing legislators to grant them exemptions to the AB-5 bill, should it become law. Those mostly include in white collar professions like financial advisors, real estate licensees, healthcare workers, accountants, lawyers and engineers, says Geller. Absent from the list are motor carriers and trucking — and there may not be much hope in securing such an exemption, says Geller, as use of independent contractors by the trucking industry is at the core of the push for the legislation.
The Western States Trucking Association, who is challenging the Dynamex decision in federal court, last week sent an alert to its members, many of them small carriers, attempting to mobilize them against AB-5. WSTA argues that the Dynamex decision has quashed single-truck owner-operators and their ability to lease on to carriers in California. The group also argues it disrupts carriers’ ability to move freight.
