Assembly Bill 5 (Gonzales), signed into law in 2019, created new requirements regarding how workers should be classified as employees or independent contractors. Effective January 2020, the Bill created a new "ABC Test” where a worker is considered an employee and not an independent contractor, unless the hiring entity meets all three conditions:
A. The person is independent of the hiring organization in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B. The person performs work that is outside the hiring entity’s business.
C. The person is routinely doing work in an independently established trade, occupation, or business that is the same as the work being requested and performed
Opponents of the Bill noted that this change would greatly disrupt a number of sectors, including trucking. The California Trucking Association (CTA) filed suit against the California Attorney General asserting that AB 5 is pre-empted under the Federal Aviation Administration Authorization Act of 1994. CTA was initially successful at the trial court level and obtained an injunction from enforcement of AB 5 but lost at the 9th Circuit Court of Appeals.
On June 30, 2022, the U.S. Supreme Court denied a petition from CTA to review the case.
Unless some sort of administrative action is taken, Owner-Operator/Independent Truckers are now prohibited under AB 5. They will not qualify for the business-to-business exemption under AB 5 and cannot negotiate their own rates with the motor carrier pursuant to Federal law. Owner-Operators lease their services and trucks and lack independent operating authority. Further, the specific requirements of AB 5, which require a separate business location and contracting requirements, are also a barrier for owner operators due to the requirements of the FAAA.
After the decision was announced, CTA stated "In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation.”
California League Of Food Producers