UPDATE: Sept. 11, 2019: The California State Assembly passed Assembly Bill 5 with a 56 to 15 vote Wednesday. The Assembly had passed a previous version but had to approve amendments. This followed the 29-11 California State Senate vote in favor of the bill late Tuesday. It will now head to the Governor's desk who voiced support for the measure in an op-ed earlier this month.
- Assembly Bill 5 (AB5) in the California legislature would rewrite the state's employment laws to make it harder for employers to classify workers as independent contractors by requiring employers to follow a three-part test to determine contractor eligibility. The state's Supreme Court created the test in its decision on Dynamex Operations West, Inc. v. Superior Court of Los Angeles last year.
- The bill passed the House earlier this year and is set for a final vote in the Senate later this week, according to multiple media outlets.
- The bill has drawn support from multiple unions in the state, including the California Teamsters Public Affairs Council, which represents truck drivers. Carriers, however, have been less supportive of the legislation with the California Trucking Association (CTA) formally opposing the bill.
The bill has gained a lot of attention because of the impact it could have on ridesharing applications such as Uber and Lyft. Lawsuits involving employer misclassification cases have also become fairly common in the trucking industry with large carriers like FedEx, NFI and XPO all being accused of misclassification over the last couple of years.
The lawsuits tend to allege the employer classified the driver or worker as a contractor to avoid having to provide overtime, meal breaks, minimum wage and various other benefits. The plaintiffs in the case tend to argue the defendant has total control over their schedule — something that would be expected from an employee, but not a contractor, the suits argue.
This is a pattern that "really permeates kind of every level of the trucking industry," Shane Gusman, legislative director with the California Teamsters Public Affairs Council, told Supply Chain Dive in an interview. "This is the law of the land from April of 2018 [when the Dynamex decision was handed down]," Gusman said. "So it's already been the law of the land for a year and a half. Anybody not complying with it is already in violation. They should have been trying to figure out how to comply starting way back then."
The full three-part test set up by the legislation would be:
- The individual 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 individual performs work that is outside the usual course of the hiring entity’s business.
- The individual is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
To be considered an independent contractor under AB5 the worker would need to "perform work that is outside the usual course of the hiring entity’s business," the bill's text reads. A truck driver working for a carrier performs the work that is within the company's usual course of business.
There are written exceptions for industries where there isn't believed to be as much misclassification, including freelance writers, artists and grant writers.
CTA argues the rules proposed under AB5 would hurt independent truckers. "AB 5 would deny a significant segment of the trucking industry the ability to continue operating as independent owner-operators," a CTA spokesperson told Supply Chain Dive in an email. The CTA did not expand on how exactly the bill would cause this to happen. However, other associations have voiced similar concerns.
If AB5 passes, Gusman said independent truckers would likely be classified as an employee when working with a larger carrier, but added it's a common practice for an independent driver to use their own truck and get reimbursed.
"Additionally, an owner operator could contract directly with a shipper and not need to be reclassified," he said in a follow-up email.
Sept. 13 is the last day a bill can be passed, before interim recess begins. If the Senate passes AB5, it will have to go back to the House for a vote because it has been amended.