What’s Going On With AB5 In California (The Downfall Of Trucking, And Other Independent Contractors)
Trucking Insurance – Livery Insurance: New Bill To Enforce Workers Comp Insurance.
California’s attempt to reshape the “gig” economy encountered a major roadblock earlier this month when a federal court issued a temporary injunction prohibiting truck drivers from enforcing the state’s new laws, citing a dispute with federal law. The roadblock is by no means fatal, but it’s not insignificant — not to be decided when there are so many lawsuits left.
California passed Assembly Bill 5 last year, which became effective on Jan. 1. The new law, widely known as AB 5, creates a strict checklist to determine whether a person providing services to a business is an independent contractor. The law treats drivers, computer coders, writers and other gig workers as if the businesses were all exploiting the individuals.
Under AB 5 the individual classified as an employee is entitled to full protection under the employment laws of the Golden State. Additionally, this type of classification is mandatory. A person who provides a money service — say, driving — can’t opt out even if they wish. Critics have predicted catastrophe in the gig economy if the law is enforced.
Regarding trucking, on Jan. 13, Judge Roger Benitez of the California Southern District Court issued a temporary restraining order against the implementation of the bill’s trucking component which does not extend to other transportation industry parts as Non-Emergency Medical Transportation.
The legal challenge which AB 5 is challenged by is not limited to this. Uber and Postmates have also sued to prevent enforcement of the law, arguing it is illegal among other issues. Freelance Journalists have also filed suits contesting AB 5. And many more are sure to be on the way. Meanwhile, companies are pushing for an expected flood of claims by residents of California seeking reclassification as employees rather than their current classification as independent contractors.
Most companies are currently placing proactive measures. Vox Media backing AB 5, has told its California sports bloggers about 200 writers that they will lose their daily jobs.
Which leads us to a N.Y.E. California Trucking Association v. Becerra federal district court ruling. The trucking industry is the target of several federal regulatory interlocking regimes, and California should have known better than claiming influence over it. In the U.S. Constitution, federal law wins if federal and state legislation clashes.
The problem, explained the court, is that “AB 5 effectively mandates motor carriers to treat owner-operators as employees,” rather than the independent contractors classification given to these individuals under the relevant federal statutes. The court concluded that to allow enforcement would constitute irreparable harm. And although the injunction is only issued before hearing all the evidence — it’s hard to imagine the state will win out if the unlikely event the case ever goes to trial.
The remaining lawsuits are tougher to assess. A principal claim made by Uber and Postmates, for example, is that the many exemptions from AB 5 make the law “irrational” and therefore a violation of equal protection. And in fact, the list of exemptions is a mad blanket: commercial fishermen and beauticians, real estate professionals and doctors, accountants and barbers.
And then there are attorneys. For years, major law firms have employed independent lawyers to consult on legal cases without becoming employees. One might think AB 5 might require reclassification of these contract workers. But one would be mistaken, because of course the same lawyers who direct the perception of which companies the law would protect took care to obtain an exemption for themselves.
Ironically vehicle repossession companies are exempt. We can picture the scene: If one of those previously autonomous livery operators or truckers should skip a few payments, the guy who comes to tow away the vehicle will be a contractor.
The Supreme Court has repeatedly agreed, as a formal matter, that a statute must have a rational basis. But that was simply a part of the argument to uphold a statute. The assertion that a law is unconstitutional due to its irrationality is one which courts rarely find compelling.
Nevertheless, a statute can be perfectly constitutional, and yet remain a terrible idea. AB 5 sits in this category. According to the main sponsor of the legislation, the goal is to protect the have been misclassified by employers looking to cut costs at the expense of workers.” But it’s difficult to know the workers that are misclassified until we certainly know who.
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