California Assembly Bill 5 (AB5) has led to major difficulties for trucking companies and truck drivers.
This bill, now a law, redefined the test used to determine if a worker is an employee or an independent contractor. It was originally aimed at delivery drivers working with third-party apps. However, major companies in that space eventually carved out exemptions for their workers. The trucking industry hasn’t been as lucky.
Let’s review what AB5 is and how it affects trucking. We’ll answer the question “can truck drivers be independent contractors in California?”
California Truck Drivers & Independent Contractors: Recent Developments
What is California AB5?
California AB5 is the short name for California Assembly Bill 5. While it’s now a law, many conversations still refer to the legislative act with this term.
The original intent of the bill was to protect workers in the gig economy. Specifically, independent contractors who offer delivery or other services with their vehicles. However, the scope grew and changed significantly as time passed.
AB5 includes a test to determine if a worker is an employee or independent contractor. This includes, but is not limited to, truck drivers. The bill led to a variety of issues for truck drivers, trucking companies, and the many businesses that depend on them. It could lead to more issues related to the current truck driver shortage and affect the supply chain.
The current process for worker classification is a three-part test. If the relationship between business and worker fails any part of this test, then the worker is an employee. We’ve previously listed the three parts of the test, which are:
- The worker is neither controlled nor directed by the company or hiring entity. This must be proven both in contractual language and in actual day-to-day work.
- The worker’s services do not directly contribute to the usual course of the hiring company’s core business activities.
- The worker has an independent trade or business established, related to the same type of services they provide.
Are Truck Drivers Exempt from AB5?
The vast majority of independent contractors working as truck drivers will fail the three-part AB5 test. That includes owners who have their own operating authority.
The California Trucking Association explains further. “The law does not differentiate leased owner-operators from those who operate under their own authority. All hiring entities will need to satisfy the ‘ABC’ test.”
AB5 was originally targeted toward drivers working with delivery apps. Both types of drivers were independent contractors in the past. However, this is a very different type of work than is performed by truck drivers.
The lobby supporting those apps successfully secured an exemption for such drivers. Ironically, the original reasoning behind AB5 is not part of the law currently in effect.
Are Trucking Companies Included in AB5?
AB5 impacts trucking companies and drivers alike. The test itself applies to drivers and not trucking companies. However, the results essentially prohibit trucking companies from working with independent contractor truck drivers.
Will the AB5 Bill Affect the Entire Trucking Industry?
AB5 only affects work performed in California. As state-level legislation, AB5 is limited to the state of California. It does not apply to the rest of the United States. Other states could consider or pass similar legislation, however.
Are Truck Drivers Employees or Independent Contractors in California?
When it comes to employee vs. independent contractor, truck drivers in California generally need to be employees.
Some scenarios exist where a contractor driver may pass the three-part AB5 test.
However, those are very limited. As ATBS explains, the second part of the AB5 test is the reason why. It refers to the need to perform work beyond the company’s usual business. This severely restricts those situations.
How Does AB5 Impact Drayage and Trucking at Major Ports?
Prior to AB5, the majority of intermodal port truck drivers in California were independent contractors. There was significant concern about supply chain bottlenecks and a lack of drivers before the law came into effect.
The law has now been active for several months (at the time of this article’s publication). At Iraheta Bros, we’ve made careful decisions and have successfully adjusted to comply with state law while continuing our operations. Other dependable drayage carriers have as well.
There’s no doubt that complications, additional costs, and other issues have made the process difficult. However, we’ve persevered. We’re proud to continue offering high-quality services like drayage, warehousing, and more for our clients.