What is AB5?
AB5 is good intent gone bad. Since its inception in 2019, AB5, a California legislation, has required many independent contractors to undergo what is called an “ABC” test to determine whether they should be reclassified as employees instead of independent contractors. Even though being classified as employees affords a number of benefits, some of these individuals have chosen to be independent contractors.
AB5 is originally intended to re-categorize some app-based drivers from independent contractors to employees, and has far-reaching, unintended consequences. Since then California has introduced Proposition 22 as well as AB 2257 to amend AB5. The amendments seek to relax and create exemptions for certain professions from AB5. Unfortunately, the changes to date have not applied to the logistics industry.
AB5’s ABC Test
The AB5 has an ABC test that comes in three parts. If the legal entity hiring (ie the motor carrier authority) can satisfy the three part test when engaging with the entity being hired (in this case the owner operator), then the engagement does NOT have to be an employer-employee relationship.
Generally speaking the three qualifications reworded specifically for the trucking application:
- The owner operator is free from the control and direction of the motor carrier authority.
- The owner operator is providing services outside the core business of the motor carrier authority.
- The owner operator is performing similar tasks with this motor carrier authority as it is independently doing elsewhere.
We are not lawyers and our paraphrasing is for informational purposes only. For the actual test, please refer to the definition outlined by California’s Department of Industrial Relations.
How Does AB5 Affect Trucking?
To date, commercial truckers remain subject to AB5 and have not received similar exemptions as some professions. Owner operators based in or delivering loads originating from California may be reclassified as employees under AB5.
In effect this means owner operators have three options:
- Join a fleet as a company driver in California
- Become their own registered motor carrier authority in California
- Move out of California and be an owner operator in another state
Truckers who are company drivers remain unaffected because their status remains that of employees. Similarly, owner operators who already operate under their own MC / DOT number are unaffected, since they have no independent contractor arrangement with another motor carrier.
Owner operators who are leased onto another carrier not based in California may still be affected. To avoid the test in California, truckers should avoid picking up loads in California. Loads delivered to California do not require to pass the ABC test.
Given its impact, there remains ongoing litigation to appeal the decision of applying AB5 to truckers.
AB5 Trucking Updates: How to Stay Informed
This legislation remains a hot topic of debate and court appeals, following the legal firms actively representing truckers in California court cases that can help truckers stay updated with the latest ruling.
Here are two sources to help keep track of ongoing evolving changes:
- Cullen Law - This firm has been helping represent truckers in California court appeals. The firm has a webpage tracking their latest updates on AB 5 and AB 2257.
- State of California: Department of Industrial Relations - This page provides an FAQ on AB5 that goes in more technical depth.
Keep Adapting
AB5 is an evolving situation. Trucking is a hard enough job without the uncertainty that the law brings. California is home to over 70,000 owner operators, and this legislation adds strain on their already challenging business. To stay in business is to keep adapting.
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