California Law Endangers Owner-Operators


California wants truck drivers to be considered employees. And this is causing some trouble for truck drivers who are considered independent contractors.

Assembly Bill 5 (AB5,) passed on September 10th in the State Senate, declares that all workers are automatically considered employees. But the bill, targeted at Uber and Lyft drivers, may have some collateral damage.

To prove a worker is not an employee, the employer/company has to verify the person hired passes “The ABC Test.”

And most truckers don’t pass that test. Here’s why:

The ABC Test

Trucking companies hoping to prove their truckers are independent contractors, rather than employees, will need to prove the following.

  • A – Worker is free to conduct work without hiring entity’s control and direction in regards to performance.
  • B – Worker performs work outside the usual course of business.
  • C – Worker engages in an independently-established trade, occupation, or business of the same nature as the work they perform.

As you can see, truckers can typically fulfill every requirement, except B. This is because the work that truck drivers perform (driving and transporting goods) is the same type of work that the company that hires them is known for (driving and transporting goods).

According to attorney Joel M. Van Parys, “If a company’s business is trucking,transportation or logistics, then it will be very difficult for truck drivers to pass this part of the test.”

Company Drivers Get Benefits

When a company driver is an employee, they are entitled to certain benefits by law. Although the negotiations and conflicts between business owners and workers are ever-continuing, workers have earned the following rights:

  • Paid sick leave
  • Family leave
  • Disability
  • Workers compensation
  • Unemployment
  • Health Insurance – if establishment has less than 50 employees
  • Social security tax
  • Medicare tax

The benefit to the trucking company is that these employee truck drivers usually only do runs for that company. And the drivers rely on the company to give them miles.

But What About Owner-Operators?

Unlike company drivers who commit to a single trucking company long-term, owner-operators (OOs) establish their own business by gathering multiple contracts from various companies and have no problem being an independent contractor.

These contracts are short-term, and owner-operators are often hired on a seasonal basis for various types of freight.

Unfortunately, Assembly Bill 5 appears to make this type of business obsolete.

OOs easily pass A and C of the ABC independent contractor test. But the B requires all of the companies they work for to consider them an employee. And this raises a number of problems and tax concerns when considering short-term workers with specialized jobs to be employees.

There doesn’t appear to be wiggle room in the wording either. The only exemption to the ABC test mandate is given to construction hauls. And even then, those working in the field only have a two-year grace period before they are required to adhere to Assembly Bill 5.

After the bill was passed, California Trucking Association’s CEO, Shawn Yadon, made the following statement in a press release: “There is no reason why protecting workers does not include defending the right of tens of thousands of drivers who have built their businesses around the independent owner-operator model, invested hundreds of thousands of dollars in their trucks and have operated their own businesses for decades.”

How can employee workers’ rights be protected while also correctly classifying those who perform limited-time work from the businesses they created? California will have to find out.