A bill that has impacted domestic shipping over the last years has had many asking what is AB5 in trucking. AB5, or Assembly Bill 5, is a California state law that took effect on January 1, 2020. The bill restricts the misclassification of workers as independent contractors instead of employees. Its goal is to ensure proper benefits and protections for workers. Despite its introduction in 2020, many in the industry have been fighting against it with little success. Various groups in California’s trucking sector have filed numerous lawsuits against AB5 since its enactment. This article will break down the bill and explain why players in the industry are against it.
What Is AB5 In Trucking And Why Are So Many Against It?
As previously mentioned, AB5 reclassifies truckers in California as employees rather than independent contractors. This is to prevent misclassification and provide equal rights and benefits for employees. Under the AB5, workers are either independent contractors or employees, depending on whether they pass the ABC test. A worker is an independent contractor if:
- A: The worker is free from the control and direction of the hiring entity.
- B: The worker performs work outside the usual course of the hiring entity’s business.
- C: The worker is customarily engaged in an independently established trade, occupation, or business.
Part B is the most challenging for independent truckers, as they often perform work within the scope of the hiring entity’s business.
A significant portion of the trucking industry in California is against AB5 due to its impact on independent owner-operators. The B portion of AB5 makes it difficult for drivers to operate as owner-operators who contact carriers. It becomes challenging to do this legally without the AB5 classifying them as employees. Reclassifying owner-operators as employees may take away their independence and freedom. In particular, it deprives truckers of control over their schedules and limits their ability to work for multiple carriers. Hiring former contractors as workers can also lead to increased administrative burden and cost. There have been supply chain disruptions in response to the law from protests and slowdowns at ports.
The Fight Against AB5 Is Becoming A Losing Battle
Over the last 5 years, groups like the OOIDA (Owner-Operator Independent Drivers Association) have fought against the AB5 in court. A more recent appeal by OOIDA was rejected by the 9th Circuit Court of Appeals last week. OOIDA has argued that the AB5 discriminates against interstate and intrastate drivers. The court shut down the case, noting, “AB5 does not preclude out-of-state drivers from working in California, nor does it favor in-state drivers at the expense of out-of-state drivers.” OOIDA has released a statement saying it is disappointed with the outcome and is assessing its options. The next step could be to appeal to the Supreme Court or end the fight against AB5.
When shipping cargo domestically, it is vital to understand how various regulations can impact your shipment. Failure to understand can lead to delays, monetary loss, and even cargo loss when starting. An ideal way to get started is by contacting a freight broker. Brokers act as intermediaries between shippers and carriers, coordinating freight transport on behalf of the shipper. They accomplish this by offering services such as rate finding, carrier connection, documentation provision, and consultation. Reach A1 Worldwide Logistics at 786-375-9420 or info@a1fsinc.com to start moving your goods anywhere in the U.S. We have FTL (Full Truckload), LTL (Less-Than Truckload), Temperature-Controlled, Drayage, Heavy Haul, and more for ensuring your shipment’s success.