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AB5: California Law Affects Owner/Operators

AB5: California Law Affects Owner/Operators

  • Blog

AB5 (Assembly Bill 5) is going to affect upwards of 70,000 trucking jobs in the US. With the trucking industry already hitting an all-time low for new recruits, this new bill will drastically change the way independent contractors are viewed by employers.

ABC Test

The ABC test is the industry standard for how a hiring entity must establish its contract with an owner/operator. The process is as follows:

A: The worker is free from the control and direction of the hiring entity
B:  The worker performs work that is outside the usual course of the hiring entity business.
C: The worker is customarily engaged in an independently established trade, occupation, and business.

AB5: “B” Is The Problem

The major issue from this new bill is from the “B” section. Where most owner/operators work in partnership with trucking companies, this directly works against article “B”.

B:  The worker performs work that is outside the usual course of the hiring entity business.

The issue is that most trucking businesses outsource to owner-operators. This has been a growing method for shipping due to the shortage of new truck drivers. Trucking businesses and independent drivers have their own “ecosystem” that has developed clear and effective methods for the two.

The owner-operator is required to perform tasks that rest outside of what the company typically does. So a trucking company (who typically ships goods) cannot reach out to an independent driver to ship products. This becomes a direct conflict of interest within the industry.

AB5: Solutions

Trucking companies have found small ways around this new bill. One of the largest and most effective ways is simply to hire an LLC (limited liability company). This ensures that there is a fine line between contractor and operator. This strategy acts as more of a “band-aid” than any real fix for the issue.

Trucking Stand-Off

Many within the trucking industry are working to counter the bill. The goal is to have a selective section specifically for own-operators. Having a section that permits owner-operators to continue their services without government interference is the end-goal. The bill primarily targets Uber/Lyft drivers, but it also creates a broad brush stroke that includes the trucking industry.

As for the future, it is still uncertain how these events will pan-out. With the industry already in a large deficit with fresh truckers, this bill ads another big slam. 2020 might not look that bright, but steps are being taken to help improve the standards for both employers and employees.

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