SACRAMENTO, Calif. — The federal judge who issued a last-moment restraining order preventing the State of California from enforcing its new AB5 law on motor carriers has granted another reprieve following a Jan. 13 hearing. Many industry stakeholders anticipated the judge would approve the California Trucking Association’s (CTA) request for a preliminary injunction in the case. Yet, at the close of the hearing, U.S. District Judge Roger Benitez extended the restraining order until he rules on the injunction request. His ruling is anticipated by the end of January.
Benitez’ decision followed lengthy arguments in which he questioned both CTA representatives and those from the State of California. The AB5 law is now in effect for most California employers other than motor carriers, although freelance writers and photographers, Uber drivers, and some construction-related businesses have filed separate lawsuits.
AB5 requires employers to use an “ABC” test to determine if a worker is an independent contractor or employee of the company. Most problematic for the trucking industry is the “B” test, which states a company cannot use independent contractors to perform work unless it is “outside the usual course of the hiring entity’s business.” In other words, according to the CTA and other industry stakeholders, AB5 prevents a motor carrier from working with independent contractors (i.e., owner-operators), an arrangement used by most motor carriers for decades.
While AB5 is intended to prevent companies from classifying “would be” employees as independent contractors, relationships that save companies money as they do not have to offer benefits, paid time off, or pay a portion of the contractor’s payroll taxes. On the other hand, many independent contractors prefer such an arrangement for the flexibility it offers in accepting work, charging competitive fees, and allowing them to contract with multiple companies.
Under AB5, thousands of California-based owner-operators (estimated to comprise over 25% of drivers in the state) would be left unemployed, at least in California. Reports indicate at least one nationwide carrier, Prime Inc., has offered 6,000 independent contractors “relocation packages” to assist them in moving out of California where the contractors would be exempt from the law. Such relocations will likely impact stakeholders throughout the trucking industry, as truck sales, repair orders, diesel sales, and even advertising will likely decrease at a rate corresponding with the number of independent contractors who choose to move to another state.
For the time-being, carriers and independent contractors alike can sit tight. While those involved in the hearing expect an end-of-January ruling, the wheels of justice turn slowly.
The Trucker News Staff produces engaging content for not only TheTrucker.com, but also The Trucker Newspaper, which has been serving the trucking industry for more than 30 years. With a focus on drivers, the Trucker News Staff aims to provide relevant, objective content pertaining to the trucking segment of the transportation industry. The Trucker News Staff is based in Little Rock, Arkansas.
