How Assembly Bill 5 Impacts Truckers

Truck drivers are divided on Assembly Bill 5, a California law that limits when workers can be contractors instead of employees. Top trucking officials said that the proposed law – which essentially sought to reclassify owner-operators and those working in the ‘gig’ economy has employees – would have significantly disrupted interstate commerce. “This law has the potential to be a major disruption and shake-up to the trucking industry,” says Joe Bukovsky, PMC Head of Transportation.

 

Assembly Bill 5 was passed last year and went into effect at the beginning of 2020. It was named the “ABC test” named after the three prongs the hiring entity must establish to assert the independent contractor status of workers:

  • A – the worker is free from the control and direction of the hiring entity
  • B – the worker performs work that is outside the usual course of the hiring entity business
  • C – the worker is customarily engaged in an independently established trade, occupation, and business.

 

Under the ABC test, a contractor is deemed an employee for purposes of the California Labor Code unless the hiring entity – not the contractor – can establish all three conditions.

 

The law was originally aimed at workers for ride-sharing companies like Uber and Lyft, as well as some trucking companies that have been accused of misclassifying drivers. However, the line between an employee and an independent contractor continues to be blurry, so the law included an ABC test to clarify under which circumstances workers need to be considered employees.

 

The reason why Assembly Bill 5 is so problematic to the trucking industry is also why the law can be deemed inapplicable to the trucking industry. For example, imagine an owner-operator is driving from Phoenix to San Diego. Will the driver be a contractor in Arizona but an employee the moment they cross over into California? “With tens of thousands of owner operators on the road every day, these questions can present challenges and headaches to trucking firms and Workers’ Compensation Insurance carriers,” says Joe.

 

With owner-operators making up a significant chunk of the trucking workforce, and the ABC test potentially preventing drivers who have always considered themselves as independent entities from remaining so, CTA says the bill wrongfully restricts their ability to work.

 

Judge Roger Benitez agreed and issued a preliminary injunction on the eve of the law taking effect in January and reaffirmed it two weeks later.

 

PMC is the single source for workers’ compensation solutions. With experts on-call to help independent insurance agents stay competitive, we provide specialty programs in transportation and more. Find out how PMC can help you expand your book of business. Contact us today at 781-449-7744 or info@pmcinsurance.com.

By PMC Insurance Group

Since 1996, PMC Insurance Group has worked to help independent agents grow their client base by offering workers' compensation solutions for a wide array of businesses. As one of the most distinguished workers' compensation wholesalers in the country, we have the tools and resources to help you create coverage programs for both small businesses and large accounts.

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