Workforce protections and it’s subsequent effects on the California economy and infrastructure have been a hot topic over the past decade with the rise of the gig economy, new technologies and the COVID-19 pandemic for both California employers and its independent contractors.

Overview & Recent Timeline of Workforce Protection Legislation in CA 

Year	Impact
2018	CA Supreme Court drastically changed the standard in California when it adopted the “ABC Test” for determining whether an individual is an employee or independent contractor under the state Industrial Welfare Commission (IWC) Wage Orders.
Sept. 2019	CA Legislature passed AB 5 to add Section 2750.3 to the Labor Code, adopting and expanding the ABC Test to define “employee” not just for purposes of the Wage Orders, but also for purposes of the Labor Code and the Unemployment Insurance Code.

 Decoding AB 5 & its impacted industries

With the passage of AB 5, many large California industries were impacted including agriculture, transportation, logistics, and food manufacturers as they tried to figure out compliance for their forces of independent contractors. Some industries such as rideshare employers Uber and Lyft made their struggles more publicized than others with the introduction of California Proposition 22, which California voters passed in November 2020 allowing those workers to remain independent contractors.

 Trucking & logistics

Less publicized, but just as impactful, the trucking and logistics industries in California are the next major industry to legally challenge AB 5. Originally, the trucking industry and its independent owner-operators were included in AB 5’s list of industries that needed to comply with the new “ABC test.” However, in January 2020, a preliminary injunction was granted in federal court, which blocked the State of California from enforcing AB 5 against motor carriers.

 Trucking & fleet operations fast facts

— Owner-operators comprise the majority of the drivers in the trucking industry

— 70,000 owner operators are based in California and over 350,000 nationwide per the US Census

— 80% of California communities depend on trucks to deliver goods

Uncertain future

Although the current injunction allows owner operators and their employers to operate under “business as usual,” the uncertainty of future legislation is affecting both groups. Employers continue to face shortages of transportation workers and the ability to retain them for future planning. Industries that depend on owner-operators including transportation and agricultural businesses are also affected by AB 5. In addition, COVID-19 and recent infrastructure crises have further demonstrated the importance of ensuring supplies in light of the recent nationwide shut downs and mandates to avoid interruptions to the retail and food supply chain.

Navigating the new normal

With California owner-operators continuing to comprise the majority of owner-operators in the nation, future decisions on AB 5 for the trucking and logistics industries will have both local, state and national implications and likely to affect legislation in other states. Commercial fleets are already moving away from owner operators based in California and similar legislation has also passed in New Jersey, New York and Washington.

It’s imperative that all affected parties seek assistance with experienced counsel on how to comply with AB 5 in California and also foresee any compliance concerns in other states as legislation continues to evolve on this issue. There are many options that fleet operators and adjacent industries can explore by seeking experienced legal advice with a track record on the new ABC test, setting up protections during contract negotiations and implementing protection mechanisms for daily business operation to help mitigate damages.

____________________________________________

Theodore “Tad” Hoppe is the founder of Hoppe Law. For more information visit hoppe-law.com.