Legislation that could severely disrupt the owner-operator trucking model in California unless it includes a critical exemption cleared another hurdle on its way to the Governor’s desk.
Assembly Bill 5 (AB 5), which would codify the “ABC test” for employee status prescribed in the California Supreme Court’s 2018 Dynamex decision, passed the state senate’s Standing Committee on Labor, Public Employment and Retirement by a 4 to 1 vote on July 10.
Supporters of the legislation – which seeks to protect workers from employers that attempt to classify them as independent contractors instead of employees to avoid paying higher wages and benefits – turned out in force, with hundreds lining the halls outside the hearing room and attending a rally outside the Capitol in Sacramento following the vote.
“The Dynamex ruling was a moral proclamation by the state’s highest court with a message that rang loud and clear – enough is enough,” said Assemblywoman Lorena Gonzalez (D-San Diego), the sponsor of the legislation, in her remarks to the committee. “We cannot sit by while companies pass off their own costs of doing business onto California’s taxpayers and responsible businesses, while depriving millions of workers of the labor law protections that they are rightfully entitled to.”
But the bill in its current form would be a disaster for trucking owner-operators who wish to remain independent, they assert, because the three-prong “ABC” test that designates employee status in the legislation provides no leeway for independent haulers who happen to work for or with companies, such as truck brokers, whose primary business is trucking.
The Western States Trucking Association (WSTA) warned that the resulting liabilities that would hit employers as a result of a reclassification would mean some entities would refuse to work with owner-operators.
WSTA was confident leading up to the hearing that ongoing discussions with Gonzalez would result in an exemption from the employment test in the legislation, which had been secured by other industry sectors that thrive under the current law as independent contractors.
While acknowledging those ongoing discussions with the trucking industry at the hearing, Gonzalez also testified that the trucking industry presented “the toughest situation” because of two pending lawsuits – one filed by WSTA – “which puts us in an awkward position. We usually don’t intervene when there’s a lawsuit going on,” she said. WSTA and the California Trucking Association, in another lawsuit, allege that the Dynamex decision is preempted by federal law and therefore does not apply to the trucking industry.
“There are so many different situations around trucking, and it’s an industry that we know historically has misclassified its workers,” Gonzalez added. “We are where we are today with the frustration in the courts largely because of the trucking industry.”
The future of the legislation itself also remains uncertain. AB 5 must next be taken up by the state senate’s Appropriations Committee, but that won’t happen until August after the legislature returns from a month-long summer break. It then goes to the Senate floor for a vote before coming back to the Assembly chamber for a concurrence vote. If passed, it would then head to Governor Gavin Newsom’s desk for signing. All must be completed before September 13 or the bill dies, according to a source familiar with the legislation.
“It’s difficult to say what will happen with AB 5,” the source told FreightWaves. “It easily passed the Assembly, but the Senate now seems to be a lot more moderate – it killed an extremely popular housing bill earlier in the year.”