Understanding the AB5 Law

If you follow any of the transportation or trucking-related publications or are situated on the West Coast, you probably have seen or heard the term “AB5”. The AB5 law, popularly known as the “gig worker bill”, is formerly known as California Assembly Bill 5. Here’s a quick rundown of how it came to be, what it means, and who is affected.

WHAT IS THE AB5 LAW TIMELINE?

1. Passed by the California Senate and House, and signed into law by the Governor of California in September 2019
2. A preliminary injunction delayed the enactment of the bill in 2020
3. In June 2022, the Supreme Court of the U.S. declined to hear the appeal, thus rendering the injunction defunct and AB5 cleared to be enacted

WHAT DOES THE AB5 LAW MEAN?

At its core, the bill was passed to decide if a worker meets the classification of an employee or maintains independent contractor status. The bill uses a three-prong test to determine a worker’s classification. To be identified as an independent contractor, a worker must:

1. Be free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
2. Perform work that is outside the usual course of the hiring entity’s business.
3. Be customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

WHO GETS AFFECTED?

Like any piece of legislation, there are exceptions. Unfortunately, independent contractor truck drivers, otherwise known as owner-operators are not part of the exception list, and that number is approximately 70,000 in the state of California. Trucking companies that utilize the service of owner-operators to run their business are at risk of being in violation of the law.

IF I WANT TO WORK WITH A motor CARRIER BASED IN CALIFORNIA, DO I NEED TO VERIFY THAT THEY ARE AB5 COMPLIANT?

As with any carrier, whether they are based in California or any other state, they are required to comply with all federal and state regulations. Some states have more regulations than others, with the California CARB regulation being a good example. As with those regulations, the responsibility to comply 100 percent lies with the carrier.

WHAT COULD BE THE IMPACT OF THIS LEGISLATION TAKING EFFECT? 

The estimate is that 70,000 truck drivers in the state of California could be impacted. Certainly, there is the option for companies that utilize these independent truck drivers to hire them as employees. That may be unlikely as these drivers enjoy the benefits of running their own business versus being a company driver. There is also the possibility that owner-operators will look to relocate outside the state of California. Nonetheless, this law will put further pressure on California’s capacity among current activity in ad around California’s ports, creating another disruption to the U.S.’s already stressed supply chains.

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