California webinar attempts to ease confusion on AB5 law

August 24, 2022

Mark Schremmer

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California’s Employment Development Department and Department of Industrial Relations hosted a webinar on Wednesday, Aug. 24, to explain how Assembly Bill 5 will apply to the trucking industry.

So all the confusion is cleared up now, right?

Well, not so fast.

While the two-hour webinar provided background on how AB5 determines whether a worker is an employer or independent contractor and went through all of the requirements to receive a business-to-business exception, the diversity of the trucking industry makes it difficult to provide truckers any one-size-fits-all answers.

The Owner-Operator Independent Drivers Association, which has followed the AB5 case closely, is attempting to work with state officials to provide more clarity.

“We are still unpacking the information shared by California during (Wednesday’s) webinar,” said Bryce Mongeon, OOIDA’s director of legislative affairs. “At first glance, this may help to answer some questions, but given the diversity of the trucking industry, it’s nearly impossible to make any definitive statements about how the law will be enforced. We will continue to review and be in contact with the state to help get some clarity for truckers.”

What we know

California passed AB5, which codified the ABC Test, into law in 2019. AB5 makes it more difficult for a worker to be considered an independent contractor. Many in the trucking industry, including the California Trucking Association and the Owner-Operator Independent Drivers Association, said the law would force the end of the owner-operator model in the state.

The ABC Test has three parts:

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.

 

The California Trucking Association argued that AB5 was preempted by federal law and was granted a preliminary injunction in district court. The U.S. Court of Appeals for the Ninth Circuit later overruled the district court, and then the Supreme Court denied the California Trucking Association’s petition to review the case.

The Supreme Court’s decision kicked the case back to the district court, which has a hearing scheduled for Monday, Aug. 29. At that time, the district court could formally end the injunction.

The California Trucking Association also is lobbying the state legislature to reverse AB5.

Business-to-business exception

As part of the webinar, the California officials explained the criteria for a business-to-business exception. If the exception is granted, the less restrictive Borello Standard would apply rather than the ABC Test in determining classification.

The required criteria for a business-to-business exception:

  • Free from control and directions.
  • Services are provided directly to the contracting business.
  • Contract is in writing.
  • Business license or business tax registration.
  • Business service provider maintains a business location.
  • Customarily engaged in an independently established business.
  • Contracts with other businesses.
  • Advertises and holds itself out to the public.
  • Provides their own tools, vehicles and equipment.
  • Negotiates rates.
  • Set their own hours and location.
  • Not performing work that requires a California Contractors State License Board license.

More information regarding AB5 and California classification laws can be found here.

Another webinar

California plans to host another webinar about AB5 in the trucking industry at 10 a.m. Pacific on Tuesday, Sept. 13. LL

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Mark Schremmer, senior editor, joined Land Line in 2015. An award-winning journalist and former assistant news editor at The Topeka Capital-Journal, he brings fresh ideas, solid reporting skills, and more than two decades of journalism experience to our staff.