California bill on independent contractors likely to pass without any carve-out for truckers

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Guest post by FreightWaves’ John Kingston

If the California Senate approves the legislation codifying the provisions of the Dynamex decision regarding the classification of independent contract workers – like drivers – it likely won’t have an exemption for the trucking industry. 

That’s the conclusion of Joe Rajkovacz, director of governmental affairs & communications for the Western States Trucking Association (WSTA), following comments made last week by the Senate’s top legislator. 

“AB 5 is going to pass in this legislative session,” Rajkovacz said in an email to FreightWaves. “What isn’t likely to be dealt with in the few weeks remaining in the legislative session are amendments to protect various industries such as the ‘gig companies’ nor with increasing disappointment for us, trucking.”

AB5 passed the California Assembly in late May. It puts into law the provisions of the Dynamex decision – almost verbatim – that came out of that transportation services company’s decision to convert all its workers en masse from employees to independent contractors.

The Dynamex decision, handed down in early 2018, ruled against Dynamex in the lawsuit that followed the company’s changes. The decision was notable primarily for its so-called “ABC test,” three provisions that the court said should be used to determine if a worker is an employee or an independent contractor.

It is what Rajkovacz calls the “B prong” of that decision – and the legislation modeled after it in AB5 – that concerns the trucking industry. It states a worker can be an independent contractor if that person “performs work that is outside the usual course of the hiring entity’s business.” It is being interpreted by the trucking industry as meaning a trucking company could not hire an independent owner-operator or a driver on lease and consider them a contractor. Since the trucking company is hiring somebody to drive a truck – the hiring company’s primary business – that person should be considered an employee, according to the interpretation of the rule by WSTA and others. 

The authors of AB5 made concessions to the fact that such a situation could be complicated. Their acknowledgment of that can be seen in the fact that they added carve-outs to a disparate group of professions that ranges from hairdressers to surgeons. And in an interview with a California public radio station, Senate President Pro Tem Toni Atkins conceded the issue was complex. 

“And so I think, as we look at a gig economy, which provides some benefits to people who want to work in a different way – want to take advantage of innovation and just a change in how we work – we want to continue to make sure that those workers have the flexibility, but also have the ability to make a decent living,” Atkins said, according to a transcript of her remarks. “And that is about benefits, workers’ compensation and workers’ rights.”

But her statements gave no indication that those industries’ specific issues would get settled this year. The issue would be discussed “into next year.” Atkins said, “I think at some point, we move forward and we take action on this piece of legislation. And there’s no doubt in my mind that we probably have more work to do going into next year, as we continue to have conversations throughout the state for various professions.”

Rajkovacz expressed pessimism that the issue would be dealt with by the legislature. “What has been telegraphed by leaders in the legislature is that industries not included in current ‘carve outs’ will be addressed next year, if ever,” he said in his email. 

Last month, Rajkovacz expressed optimism that discussions with legislative leaders would lead to a carve-out for trucking. “We are actively involved in what is going on behind the scenes,” Rajkovacz said at that time. “From a trucking industry standpoint, what we would like to see is where it is acknowledged that if you’re an independent contractor with your own authority, you are truly an independent contractor.”

That lack of optimism on the future may mean a trip to the court system for WSTA. “For trucking, the best hope lies with litigation to stop the application of the “B” prong,” he said.