Even though you may not be from California, if you are in the commercial trucking industry, you have heard about AB5. If not: AB5 stands for Assembly Bill No. 5. It was passed by the California legislature, a direct result from a major court case referred to as Dynamex. The California Supreme Court upended decades of precedent and applied an ABC test on independent contractors. This three-prong test was being thrown around in court when the California legislature sought to codify it in AB5. The new law went into effect January 2020, and it nearly ensured that almost all contractors would be re-classified as employees.
Sponsors of the bill positioned AB5 as a way to drive higher wages and benefits because the bill “classifies a worker as an employee if that person is engaged in an activity that is central to the company’s existence.” A newspaper who contracted with a “freelance” writer, would be one example. Another example would be a person who owned their truck, being contracted to haul goods for trucking entity. Each would now be deemed an employee. Consider all of the industries, and we are talking about re-classifying hundreds of thousands of workers as employees. How long do you think it would take companies to fight this in court? Almost overnight, the commercial trucking industry sought court relief, and received an injunction at the eleventh hour. However, the result is yet to be determined.
It is November 2020, and California businesses continue to reel from this bill. Besides countless court battles, the state picking winners and losers via exceptions, the same legislature proposing dozens of changes to the law, now entering stage left is…. Proposition 22. The November 3, 2020 California ballot included an initiative called Prop 22. The proposition passed, and it basically excludes the gig economy from AB5. Those working for Uber, Lyft, and other app-based companies are now exempt from the three-prong test.
So, how is it the residents of California, those most to benefit from AB5, are the same constituents who have overwhelmingly rejected it? It begs to question, who bankrolled the passage of AB5? It is clear who is against it.
Finally, with exemptions growing, and the passage of Prop 22, it feels like the California legislature didn’t fully understand the economic impact of AB5. Commercial trucking may have been the first get an injunction, but they are not alone in fighting a law the people do not support.
If you or your company have questions or concerns regarding the impact of AB5, you should speak with a professional right away. AssuredPartners Transportation has consultative professionals who assist in delivering individual solutions to your specific needs. To learn more, visit AssuredPartners Transportation or contact one of our transportation specialists.
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