Court Formally Lifts Injunction Against AB5
Recent bills passed in California can have major impacts on logistics throughout the United States. These events only showcase how unpredictable time-critical shipping can be. Here’s what you need to know about the new bill California recently passed, the injunction, and how it can affect your business.
What is AB5?
In 2018, California’s high court established the ABC test, which considers all workers to be employees unless the hiring business demonstrates all of these factors are established:
- The worker is free from the control and direction of their hirer in connection with the performance of work
- The worker performs work that is outside the usual course of the hiring entity’s business
- The worker is engaged in an independently established trade, occupation, or business
California Governor Gavin Newsome then signed Assembly Bill 5 (AB5) into law, which codifies the California Supreme Court’s decision. This sent tidal waves throughout the trucking industry, as nearly 70,000 independent truckers work throughout California. AB5 would have made it difficult for these independent truckers to find work.
In response to Governor Newsome signing AB5 into law, the CTA (California Transit Association) filed a lawsuit. The organization filed a second amended complaint in an attempt to prevent the application of AB5. CTA suggests that the B criteria of the test spell the end of the owner-operator model in the state.
The trucking organization alleges in the lawsuit that the ABC test is preempted by the supremacy and commerce clauses in the United States Constitution and contradicts the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994.
The Injunction Has Been Dissolved
The lawsuit forced Alameda County’s Superior Court of California to approve the Port of Oakland’s motion for a stipulated permanent injunction. This allowed for things to continue as usual, at least for the moment. However, on June 30th, the Supreme Court announced it denied the trucking group’s petition to review the case, kicking it back to the district court.
Then, the district court officially ended the injunction. This doesn’t mean that the legal battle is over. The CTA has until October 11th to file a renewed motion for a preliminary injunction. The deadline for final briefs regarding another injunction is December 2nd. After that deadline, the court will decide whether to schedule any additional hearing.
How Will California Enforce AB5?
It still remains unclear how California will enforce the law. California’s Employment Development Department and Department of Industrial Relations recently hosted a webinar to provide some clarity. While the webinar provided some information, the diversity of the trucking industry makes it difficult to provide California truckers any one-size-fits-all answers. It is possible to create a business-to-business exception, which if granted, allows truckers to use the less restrictive Borello Standard rather than the ABC Test. The criteria for a business-to-business exception are:
- Free from control and directions
- The contract is in writing
- Services are provided directly to the contracting business
- Negotiates rates
- Set their own hours and location
- Not performing work that requires a California Contractors State License Board license
- Provides their own tools, vehicles, and equipment
- Advertises and holds itself out to the public
If you are interested in learning more about the business-to-business exception, read this article from Land Line.
What Does This Mean For Your Business?
If you own or manage a business, you know how complicated it can be to deal with logistics. Issues like the AB5, the following protests and the legal mumbo-jumbo can make it next to impossible to keep up. Issues like this can and will affect time-critical logistics.
For example, in protest, truckers have taken to blocking roads in the Oakland ports. As you can imagine, this makes shipping difficult. The impact AB5 will have on the 70,000 independent truckers in California, one of the busiest states in the country, will impact businesses from sea to shining sea.
Help With Your Logistic Needs
If you are looking for someone to take care of your logistic needs for you, our team here at Trifecta Transport is ready to help. We can deal with all of the uncertainties that come with the shipping industry! Give us a call today to find out what it is we can do for you!