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You must have heard about the recent employment legislation that could change the entire trucking industry. On June 30,2022 Assembly Bill 5(AB5) was in effect and made wide ranging changes all around the transportation industry. We have given complete knowledge of California's Assembly Bill 5 that explains the bill and how does AB5 affect truck drivers and the industry.

What Is California's AB5? What Does AB5 Mean For Truck Drivers?

In September 2019, the California Governor Gavin Newsom, signed Assembly Bill 5 (CTA AB5) into law to offer gig workers with more rights and benefits. The law assures gig workers who are categorized as employees minimum wage with overtime pay, satisfactory employee benefits, expense reimbursements, health insurance, enough breaks, and other benefits that were not promised previously under California labor laws.

The ruling of this AB5 trucking law is based on a 2018 California Supreme Court ruling also called Dynamex Operations West v. Superior Court Leaving huge AB5 impact on the trucking sector. The legislation replaced the 11 prong Borello test with a 3 prong test and established that workers were categorized as employees unless proven by the hiring company. The 3 prong test called the ABC test decides whether a person can be qualified as an independent contractor or not.

To achieve this classification for a worker, the following three statements must be true:

• The worker is free from direct control/direction of the hiring authority while performing their duties.
• The tasks and services accomplished are outside the hiring authority's usual business activities.
• The worker routinely performs independent services similar to those for the hiring authority.

If a worker does not meet the above requirements, they must be classified and in some cases reclassified as an employee and receive the rights and benefits that come with the title. The problem with the ABC test is that it has created strict standards for employers and it is challenging for workers to pass.

Advantages and Disadvantages of Assembly Bill 5

The main dispute with AB5's 3-prong test is that it has turned some independent contractors into employees. Particularly, item B poses the most risk to a worker's livelihood because it conditions that a person performing any work similar to the company that hired them is presumed to be an employee, they must adhere to the new standards that eventually impact how they perform their job. For illustration, while gig workers can select when to work or not employees abide by a set schedule.

Although, the new California trucking law is not at all bad. Pros and Cons of AB5 are:

Advantages

• The legislation creates equal opportunities for regular employees and gig workers.
• Qualify as an employee entitled workers to advantages and other perks.

Disadvantages

• Being categorized as an employee could cost workers their flexible schedule.
• Reclassifying independent contractors as employees could increase rates for consumers.
• While AB5 does not guarantee that hiring authorities will remove flexible scheduling, employers may administer more control once they begin incurring higher costs of paying employees versus contractors.

Impact of AB5 Law California Trucking Industry

The implication of AB5 will unquestionably impact motor carriers prices, routes and services. On January 16 the District Court for the Southern District of California found AB5 redirected by the Federal Aviation Administration Authorization Act {FAAAA} and urged its application. Eventually this left the independent contractor model unaffected at the time. The State of California was also pushed to appeal the lower court's injunction to the ninth circuit court of appeals (CTA). Nevertheless, on April 28, 2021 the appeal was reversed after finding that applying AB5 anticipated the Federal Aviation Administration Authorization Act (FAAAA) and urged its application. This eventually left the independent contractor model unaffected at the time.

The state of California was also pushed to appeal the lower court's injunction to the ninth circuit Court of Appeals(CTA). However, on April 28, 2021, the appeal was reversed after finding that applying AB5 did not fully impact motor carriers rates, routes or services. For that reason it did not fall under the FAAAA's preemptive scope. Therefore, the reversal cleared AB5 to take effect. But on 23 June, 2021, the ninth circuit stayed the reversal's effect, pending the resolution of the appeal to the US Supreme Court.

Without any comment or discussion, the Supreme Court decided not to review the case and left the ninth circuit decision intact. In the state of California, AB5 was once again clear to take effect on motor carriers operating. Representatives from the State of California downplayed the impact of AB5 would have on motor carriers and the trucking industry. Drivers operating in California are bracing themselves for the highly impactful and disruptive consequences of the bill. Many motor carriers and industry experts believe that additional legal challenges associated with the AB5 test are likely to come. Still, those operating in California will unfortunately have to carry the weight of AB5.