California passes AB5, codifying Dynamex decision

California lawmakers have passed a bill, AB5, that would change how workers are classified in the state.

The state senate on Wednesday, Sept. 11, approved Assembly Bill 5, which codifies the California Supreme Court’s decision in the controversial Dynamex case. The bill now awaits the signature of Gov. Gavin Newsom, who is expected to sign the bill into law.

In 2018, the California Supreme Court’s Dynamex decision established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that all of the factors are established:

A. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B. That the worker performs work that is outside the usual course of the hiring entity’s business.
C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Supporters of AB5 called it a win for the worker, while some trucking groups said the future of independent owner-operators “is hanging on the line.” Businesses, such as Uber and Lyft, also are opposed to the bill.

AB5 was introduced by Assemblywoman Lorena Gonzalez, D-San Diego.

“Today, the legislature made it clear,” Gonzalez said in a news release. “We will not in good conscience allow free-riding businesses to profit off depriving millions of workers from basic employee rights that lead to a middle-class job. It’s our duty to look out for working men and women, not Wall Street and their get-rich-quick IPOs.”

Decision sparked controversy

The Dynamex decision sparked controversy in the trucking industry as soon as the ruling was announced.

Western States Trucking Association, as well as the California Trucking Association, quickly filed lawsuits. The trucking groups argue that part B makes it impossible for a trucking company to hire an independent contractor to haul a load.

“The future of independent owner-operators … is hanging on the line as AB5 waits on @GavinNewsom’s desk for a signature or a veto,” the California Trucking Association posted on Twitter on Thursday.

OOIDA has seen many drivers misclassified

The Owner-Operator Independent Drivers Association said truck drivers in California have been misclassified for years, but the trucking group is concerned the bill may go too far.

“Motor carriers in California have been misclassifying truck drivers for decades,” OOIDA President and CEO Todd Spencer said. “Lease-purchase schemes have plagued the industry for a long time, and there are plenty of carriers that take advantage of traditional lease agreements as well. In short, it’s no secret that many truck drivers are misclassified.

“However, there are equally as many truck drivers who truly are independent, and we’re concerned that codifying a complex court decision (Dynamex) might go too far. Our hope is that this legislation will force motor carriers in California to rethink the way they treat drivers and either hire them as employees or restructure traditional lease agreements to give owner-operators real independence. As the nation’s largest trade association representing the rights of all drivers, it’s simply impossible for OOIDA to oppose this legislation because it appears to be good for drivers – misclassified drivers and true independent owner-operators. It should be noted that we are where we are because of brazen abuses in the current system that have gone unchecked for decades.”

Spencer added that in the past it was common for owner-operators leased to carriers to be employees.