Carriers, Independent Contractors Oppose California AB 5 Contractor Law
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Trade organizations representing motor carriers and independent owner-operators alike say they strongly oppose a new California law that aims to reclassify large numbers of independent contractors as company employees, according to new documents filed in a recent appellate court challenge to the law.
The law, widely known by its legislative designation, Assembly Bill 5, or AB 5, adopts a new “ABC test” for determining whether a worker must be treated as an employee for purposes of California’s labor laws. The problem is that the test “effectively prohibits motor carriers from using independent contractor drivers,” according to the California Trucking Association’s 2018 lawsuit that has wound its way to reach the 9th U.S. Circuit Court of Appeals.
“The statute therefore makes a core feature of the motor-carrier transportation market unlawful in California,” CTA argued in its appeal filed last month seeking an en banc, or full court, rehearing before the 9th Circuit.” CTA’s request for a full court rehearing came after a three-judge panel on April 28 rejected a lower court’s preliminary injunction that had halted implementation of the law.
ABC Test
The three-pronged ABC test dictates that a worker is considered an independent contractor to whom a wage order does not apply only if the hiring agency establishes:
- A: That the worker is free from the control and direction of the hirer in connection with the performance of work, both under the contract for the performance of such work and in fact.
- B: That the worker performs work that is outside the usual course of the hiring entity’s business.
- C: That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.
Earlier this month, three trucking trade organizations filed amicus curiae, or “friend of the court” briefs, in support of CTA’s appeal request. They included American Trucking Associations, the Owner-Operator Independent Drivers Association and the Western States Trucking Association. Amicus filings are filed by groups with an interest in the litigation’s outcome, but are not actual litigants in a court fight.
All three associations agreed that the independent contractor model is essential to the trucking industry, and also argued that the industry should be federally pre-empted from the AB 5 law because it interferes with carriers’ “rates, routes or services.”
“The independent owner-operator model has a number of efficiency-promoting virtues for the trucking industry (and, by extension, the supply chain),” ATA wrote.
“And from the perspective of owner-operators, the independent contractor model offers an entrepreneurial alternative to driving as a motor carrier’s employee — an opportunity to build an independent business starting with the relatively modest investment in a power unit,” ATA said. “[It’s] no surprise, then, that owner-operators make up a substantial portion of the driver population.”
“AB 5 would eliminate a long-established business model into which hundreds of thousands of independent contractors have invested their blood, sweat and treasure to create their own businesses and be their own bosses,” OOIDA wrote. “Complying with AB 5 will force both California motor carriers and those from around the country who now serve the California market to choose to either adopt a new business model — requiring them to end their contracts with owner-operators, to incur increased costs of hiring employee drivers and to assume the cost of purchasing, maintaining and insuring trucks for their use — or to stop hauling freight in California.”
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Calling AB 5 “an all-or-nothing law,” the Western States Trucking Association wrote that under the ABC test, independent companies will be “deemed to be the employees of one another, rather than the independent contractors they truly are.”
“In the modern on-demand economy, when a trucking company wins a contract for trucking services that exceeds its available supply of trucks and employee drivers, there is no time to go out and purchase new trucks and hire and train new drivers,” WSTA wrote. The customers want — demand — the delivery of the cargo to be completed immediately. Indeed, one of the keys to winning bids on trucking services is the ability of the trucking company to reliably and quickly complete the job.”
“Many motor carriers today were founded by individuals who first gained significant trucking experience and success as independent owner-operators,” OOIDA wrote. “The independent owner-operator model is one of the few professional pathways for the creation of safe and financially stable motor carriers.”
As of this writing, the 9th Circuit’s 29 judges had not decided whether to rehear the case.
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