A California Law Regulating Ride-Share Apps Leaves Truckers in Limbo

A California law intended to help gig workers is now leaving truckers in the lurch.

In 2019, the Golden State passed A.B. 5, which went into effect the following year. The bill significantly narrowed the circumstances under which a business could refer to someone as an "independent contractor," codifying a three-part "ABC test" established under the California Supreme Court 2018 decision Dynamex Operations West, Inc. v. Superior Court of Los Angeles County. As Reason's Billy Binion summarized it at the time, "To prove that their workers are contractors and not employees, companies must show that those workers control their workload, perform work that falls outside of the business's normal scope, and are 'customarily engaged' in the occupation or business." Unless a company can demonstrate those three factors, it must classify those workers as employees, entitled to any rights and privileges thereof.

The bill explicitly targeted "gig economy" companies like Uber and Postmates, which sued trying to block implementation, as well as Lyft, DoorDash, and similar competitors. But the law also applied to a host of other industries that rely on contract or freelance workers, from churches to nail salons.

In early 2020, the California Trucking Association (CTA) won an injunction against the state to prevent the law from being enforced against the trucking sector. But in June, the Supreme Court declined to hear a case regarding a lower court's reversal of the injunction, effectively upholding A.B. 5.

Now, drivers who own and operate their own trucks are left in limbo, with little guidance on how the law applies to them. The uncertainty could have devastating effects on an already-strained supply chain.

According to the CTA, more than 70 percent of the truckers that service the largest U.S. ports are owner-operators rather than employees of a trucking firm. Owner-operators tend to contract their services to companies while maintaining their independence. Plenty of people simply don't want to be somebody else's employee, and starting one's own company as a sole proprietor can cost tens of thousands of dollars.

Speaking to Bloomberg, truckers and trucking company owners alike expressed trepidation over how the law will affect their industry. One trucking firm executive, Kevin McMaster, worried that many drivers would simply retire or work out of state if forced to become employees of a trucking firm. Bloomberg estimates that as many as 70,000 truck drivers in California could be stuck trying to navigate the new law.

Eric Sauer, CTA's senior vice president for government affairs, worried that the law's implementation "couldn't have come at a worse time" amid peak seasons in the construction and agriculture seasons, as well as for "holiday imports coming into the ports."

Supply chain issues are not new by this point, nor are challenges facing the trucking industry. Unfortunately, laws like A.B. 5, intended to apply specifically to ride-share and food delivery services, threaten to make issues worse while devastating an industry in the process.