June 30 – The U.S. Supreme Court has declined to
hear the California Trucking Association’s (CTA)
appeal of California’s Independent Contract rule
(AB5) a California state law aimed at reclassifying
owner-operators as motor carrier employees. This
means that California’s AB5 law, which would
eliminate the traditional subhaul model is expected
to take effect by July 7. Work stoppages at ports
across the state have been planned by truckers in
protest of the bill.
It is unclear how/if AB5 will impact out-of-state
truckers doing business in California. However,
the CTA believes it will have a meaningful impact
as noted in its brief to the Supreme Court: AB5
applies to all drivers while operating in California
including those from out-of-state. Accordingly,
AB5 would require all carriers and their drivers to
comply with California’s laws for employees. AB5
therefore would obligate carriers to either — use
an employee driver for the entire trip (even if the
driver could lawfully operate as an owner-operator
in other states) or — incur the expense and delay
of transferring the freight to a truck driven by an
employee when the freight enters California or to
a truck owned by an owner-operator when the
freight leaves California. The government makes
no attempt to explain how this problem could be
addressed.
The CTA is seeking a new injunction and is
currently assessing its position in obtaining a
determination that AB5 is preempted under the
Federal Aviation Administration Authorization Act.
The association believes that it will take some
months to come up with an effective strategy.
A trial attorney for the CTA (Bob Roginson) recalled
how Uber and Lyft were initially made example
of when AB5 first came out. Roginson expects
a similar move from the state with prominent
trucking companies now that the injunction is
lifted.
Because of the litigious environment in California,
all motor carriers need to mitigate risk by
immediately evaluating their operating models in
the state. We are monitoring the situation and will
update as things progress.