Will AB5 Impact Independent Truckers?
Numerous rules and regulations impact the commercial trucking industry, requiring owner-operators to stay up to date on new practices. Many in the industry are wondering what is AB5 in California law. In short, the AB5 law refers to a set of regulations that owner-operators will now have to abide by after the California Trucking Association brought the case to the Supreme Court. Here are some ways AB5 will affect independent truckers and fleet owners.
What Is AB5?
Assembly Bill 5 was initially passed in 2019 but only went into effect recently after courts challenged the bill for a long time. Drivers will now have to answer three criteria on an “ABC test” to show that they are still independent contractors in California under these new regulations. The California Trucking Association argues that this new law will take thousands of owner-operators, who are independent truckers working under contract, off the road.
Impact on Owner-Operator Drivers
AB5 will potentially make it more difficult for independent truckers to operate because of the new regulations they must follow. These include:
• Showing that the company that hired them does not have direct control of their work performance
• Displaying that the work they do differs from the work the company’s regular employees perform
• Establishing that the nature of their work falls under the category of another independent occupation, business, or trade
The industry regards the second of these three regulations as the most difficult to meet. The trucking industry has yet to see how many owner-operators will be able to meet these standards to remain independent contractors.
AB5 may not be all bad news. Some benefits of AB5 for owner-operators could include higher pay and the shift of the burden of purchasing newer, lower-emission vehicles from the driver to the company. However, it would mean less independence for some owner-operators who prefer to work as independent contractors.
Although drivers might get higher pay in the end, there are still considerable expenses involved in switching from being an independent driver to a regular company employee. These expenses include acquiring insurance, obtaining licenses, and paying any fees the company might require.
Impact on Fleet Owners
The AB5 law will change the business model of the majority of fleet owner and trucking companies. If owner-operators cannot meet the new requirements of AB5, companies may need to take these drivers on as employees rather than full-time contractors. Onboarding employees will cause a significant modification to the hiring process and require the employer to provide benefits as required by the State of California.
If the owner-operators shortage becomes as bad as some predictions and trucking companies are unable to take on enough drivers as employees of their own, those companies may decide to leave California.
Impact on Supply Chains
People will feel any effects of AB5 throughout California and the rest of the country. In 2022, the United States is still experiencing disruptions in the supply chain, same as the rest of the world. Suppose AB5 causes labor disruptions to the parties responsible for bringing goods around California and the rest of the country. In that case, it could have a ripple effect on the entire supply chain. This is especially true since California is home to the largest economy in the United States, as well as to some of its busiest seaports.
If enough drivers and companies leave California, it could cause significant delays in goods shipping out of California to other states. Delays could be especially bad news for the dairy products, fruits, and vegetables California is famous for exporting. One way to help relieve this pressure is to purchase locally grown produce and other food products, if possible, regardless of where you live.
The entire country will see the actual impact of the AB5 law as time goes on. If you are an owner-operator in the trucking industry who has any questions about obtaining transportation or equipment for your business, contact Commercial Fleet Financing today to speak with our sales team.
About Commercial Fleet Financing, Inc.:
At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with credit approval in as little as two hours, CFF’s phone number is (469) 281-2962.