California’s Assembly Bill 5, also known as AB5, was stalled at the start of January. But could AB5 be revived later on down the road, and what are the current implications for the trucking industry?
An Overview of AB5
AB5 was created to classify anyone involved in the “gig economy” as employees of the companies they worked for. The reasoning behind this was to allow those individuals to remove their “independent contractor” status and have the ability to receive benefits from employers.
AB5 expanded its scope to include rideshare companies like Uber and Lyft, as well as owner-operators who contract with larger carriers.
The outrage was immediate – with most of it coming from independent contractors. If AB5 passed, it would have resulted in lower take-home pay for formerly independent contractors.
In the worst-case scenario, the bill would have resulted in employers laying off large numbers of people because the burden on business taxes would have been unsustainable.
The Court Ruling
Federal Judge Roger Benitez ruled that there should be a temporary exclusion extended to freelance truck drivers. Prior to the ruling, the California Trucking Association argued that the expanded scope of Assembly Bill 5 would not only hurt the livelihoods of owner-operators and carriers located in the state, but it would also negatively impact the trucking industry as a whole.
AB5 conflicted directly with interstate shipping laws. Currently, contractors and businesses in other facets of the gig economy are arguing their cases to reduce the impact of – or completely eliminate – Assembly Bill 5.
The court ruling allows the relationship between owner-operators and carriers to continue unhindered, until the temporary stay expires. The ruling is also a signal to other states, such as New Jersey, that were looking to implement similar legislation.
This is a win for owner-operators, carriers, and the entire trucking industry, as shipments coming from and going to California will not be held up by state laws that would otherwise unnecessarily disrupt supply chains.
Express Freight Finance is following this case and will report on any further developments.