A preliminary injunction that blocked the immediate implementation of California’s Assembly Bill 5 law was rejected by the higher Court of Appeals which said that claims by the California Trucking Association were not pre-empted by the Federal Aviation Administration Authorization Act of 1994, and that CTA’s court efforts were “unlikely to proceed on the merits.” The California Trucking Association (CTA) claims the law would make use of independent contractors next to impossible.
AB 5 codified the ABC test into California law. The ABC test has three prongs:
- The worker is 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.
- The worker performs work that is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Assembly Bill 5 was designed to prevent app based delivery companies such as Uber, Lyft, and DoorDash from misclassifying workers, but those companies came together to spend a fortune on the Proposition 22 ballot initiative, the success of which allows those app based companies to continue to classify their workforce as independent contractors and not employees. No such carve-out exists for the trucking industry, which heavily relies on the use of owner-operators and independent contractors.
In a statement Shawn Yadon, CEO of CTA said “We continue to stand by our initial claim that the implementation of AB 5’s classification test is pre-empted by federal law and is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the transportation industry. The California Trucking Association will take any and all legal steps necessary to continue this fight on behalf of independent owner-operators and motor carriers operating in California.”
Meanwhile, at the Federal level, the Biden Administration rescinded a Trump-era rule that would have made it easier for businesses to classify workers as independent contractors instead of employees under the federal Fair Labor Standards Act (FLSA). The Department of Labor believes that there are lots of gig workers who should be classified as employees. Though they refer to app-based companies such as Uber and Lyft, California has shown that these shifts in classification can have far reaching consequences for industries that truly rely on independent contractors. Rescinding this rule led to backlash from both the American Trucking Associations (ATA) and Owner-Operator Independent Driver’s Association (OOIDA) “Prong B of the ABC Test is most problematic for leased-on owner-operators because they are performing work that is in the usual course of the hiring entity’s business hauling freight by truck,” OOIDA wrote. If actual independent contractors are unhappy with an independent contractor law, we should all be worried about it.