Truckers Face Independent Contractor Challenge in California

As you may recall, California legislators passed Assembly Bill 5 (AB 5) a few years ago, and it went into effect on January 1, 2020. Also known as the “gig worker bill,” this legislation set new standards that forced many employers to reclassify workers as employees instead of independent contractors. The bill was intended to regulate companies such as DoorDash, Lyft, and Uber. However, the result has been devastating for independent truck drivers.

What the Law Says

AB 5 requires that workers satisfy a three-part test to be categorized as independent contractors; otherwise, they are seen as employees entitled to insurance, vacation, and other job benefits. The three requirements of the test include the following:

1. Being free from the hiring entity’s control
2. Performing work beyond the hiring entity’s usual business
3. Regularly engaging in an independent occupation or trade

That second requirement makes it impossible for independent truck owner-operators to work in the trucking industry.

In September 2020, legislators passed AB 2257, which made exemptions for certain types of independent contractors. These included musicians, artists, writers, and editors. Truck owner-operators were not on that list.

What the Truckers Say

The California Trucking Association (CTA) is strongly opposed to AB 5, stating that it “would cause motor carriers and owner-operators to bear the substantial, if not insurmountable, costs and burdens associated with shifting to an employer-employee business model.”

The CTA filed a challenge against the law, but the 9th U.S. Circuit Court of Appeals ruled against the challenge. So, the CTA asked the U.S. Supreme Court to review its lawsuit.

What the Supreme Court Thinks

On June 30, the U.S. Supreme Court decided not to hear the case. As a result, most legal experts believe the CTA now has little recourse. With the Supreme Court’s decision, the 9th Circuit’s ruling remains in place. This means that federal law does not exempt truck owner-operators from AB 5 requirements.

What This Means for the Supply Chain Crisis

The trucking industry relies heavily on independent contractors. Historically, truckers have had the flexibility and the leeway to operate on their own terms. And they have fought for years to be exempt from state regulations. Now, approximately 70,000 truck owner-operators will be impacted by this change. And they are a critical part of California’s transport industry. For example, in Oakland, about 90 percent of the truckers that work within the ports are currently independent contractors.

However, this law will not affect only California. According to White House statistics, more than 72 percent of U.S. goods are transported by truck. And there is already a trucker shortage across the nation. As California trucking companies find themselves unable to pay formerly independent contractors as full-time employees, the driver shortage will increase. Truckers will lose their livelihoods, trucking companies will have to reduce their workloads, and California goods will not reach the rest of the country. All that is bad news for our already strained supply chain.

Following the Supreme Court decision, the CTA issued a statement that read in part: “Gasoline has been poured on the fire that is our ongoing supply chain crisis.”

The CTA continues to protest the court’s inaction and has appealed to the state governor and legislators, but so far, they have offered no assistance. We anticipate further challenges to the application of AB 5 as the supply chain crisis continues.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

About the author: Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. For more information on this subject, please contact the author at [email protected].