Since the Supreme Court declined to hear the California Trucking Association’s appeal regarding AB5 on June 30, it’s still unclear exactly how California’s trucking industry will be affected.
AB5 seeks to classify more workers as employees instead of independent contractors. About 70,000 truckers, and 70 percent of the drayage truckers who work near California’s seaports, are independent owner-operators. That gives them more flexibility in setting their schedules and allows them to be small-business owners by owning their trucks and contracting for deliveries.
Some truckers protested against the law yesterday. Cindy Perez said she and her husband have been employees and owner-operators at various stages in their careers, and they prefer the latter:
“We worked for a company that served the ports of LA/LB that offered us some benefits and paid for diesel fuel and permit costs, but we also got paid peanuts, didn’t get to choose our loads, and instead of owning the whole pizza, we only got a slice,” Perez told FreightWaves. “Instead, we worked hard to save our money to become owner-operators and purchase our own trucks. Yes, we are aware that we incur more costs as owner-operators, but we’re no longer company drivers and we get paid as business owners.”
The protests did not disrupt terminal activity, according to a port spokeswoman quoted by FreightWaves. Truckers in Oakland plan to protest AB5 near that city’s port on Monday. Some of the protesting truckers caused traffic delays on Los Angeles freeways (which they should not do).
AB5 adds completely unnecessary uncertainty to an already chaotic and stressed market. We still don’t know what the ultimate effects will be, according to John Kingston at FreightWaves. Some trucking companies have already altered their organizational structures to comply with the law, but others have not. It’s unclear when full enforcement of the law will actually begin, or what full enforcement will mean when it does. Kingston writes:
There is nothing specific in AB5 that says a company cannot take certain actions or must perform specific activities. Converting the text of the law to a PDF results in a document of just 12 pages, and many of those pages are either recapping the findings of the 2018 decision in a civil case known as Dynamex from which the ABC test was drawn, or spelling out the long list of professions that are exempt from the law.
As several observers of AB5 in California trucking have said, what is going to need to occur would be enforcement actions taken by the state against trucking companies. As those cases are adjudicated, a body of law and precedents will develop. Those precedents then will provide both guidance to companies trying to stay in compliance with the law and a legal foundation for further enforcement. And that is going to take time.
An easier solution than outright repeal for California politicians would be adding trucking to the long list of professions that are exempt from the law. But that would upset organized labor, which has pushed for AB5 (and similar rules at the federal level). Paul Berger writes at the Wall Street Journal:
The International Brotherhood of Teamsters, which aims to organize drivers in California, says trucking companies have misclassified drivers as independent contractors to deprive them of fair wages and benefits.
Shane Gusman, director of the California Teamsters Public Affairs Council, said much of the confusion among drivers surrounding the law is being spread by trucking companies and organizations “putting out this information to these drivers and scaring the heck out of them.”
Anytime unions say they are looking out for non-union members, it should set off your B.S. detector. Independent owner-operators are ineligible for unionization because they aren’t employees. Not one Teamster’s employment status will be affected by AB5. Their interest here is in expanding their power, not in looking out for the interests of owner-operators.
The culprit for confusion is the California government. Berger writes:
The Owner-Operator Independent Drivers Association, a Grain Valley, Mo., trade group representing small trucking companies and independent drivers, says California hasn’t indicated how drivers can comply with the law, creating confusion for truckers trying to figure out how they can keep working. . . .
Trucking associations say they are being peppered with questions, especially from smaller trucking firms, about compliance. Firms say they are meeting with lawyers to consider next steps.
Bianca Calanche, chief executive of Jaspem Truck Line Inc., in Compton, Calif., which uses roughly 15 owner-operators along with 15 employee drivers, would face sharply higher employment costs to bring independent drivers in-house and would need to buy more trucks for its fleet. Ms. Calanche said she is seeking legal advice “to see if there is any way we can keep operating, even if it means helping the owners get their own permits and own insurance.”
On top of these concerns, California truckers are also facing new emissions rules from the state government, which are set to begin on January 1, 2023. The new rules ban diesel trucks with engines made before 2010. That means approximately 80,000 trucks will become illegal on New Years Day. John Ramos reports for CBS:
“They’re going to knock out of the Port of Oakland with this rule. About 1,800 owner-operators who simply don’t have the wherewithal, because of these economic conditions, to replace these trucks,” said Joe Rajkovacz with the Western States Trucking Association.
That includes Daniel Cuellar of Pinole. He bought his used tractor trailer five years ago, but its engine missed compliance by one year. At the end of the year, he says his truck can be described in one word:
“Trash. You’ve got to sell it to another state or take it to another country,” he said.
Even putting California’s seaport issues aside, Sacramento’s regulatory hostility to trucking prevents the efficient flow of goods in and out of the largest state economy in the country. Truckers are fed up, and they should be.