Truckers Lane: U.S. Supreme Court Rejects Plea from Trucking Companies
By Robin Peterson
Questions Surround California’s AB5 Law
I was tasked with looking for evidence of supply chain disruptions through the eyes of a trucker, so I ran across this situation with potential to be a huge disrupter.
Corey asked me to introduce myself, so I will say that I’ve been driving tractor-trailers over the road since 1996. I am constantly listening to interviews, commentary, audiobooks and podcasts, learning as I drive. I’m running all across the USA, gathering information to share, and the buzz in trucking right now is with California Assembly Bill 5; also referred to as AB5.
A Brief History
The 2019 law reclassified many self-employed workers as employees, targeting companies such as Uber, Lyft, and Door Dash. It went after FedEx and other trucking companies who have been able to make contractor arrangements that keep drivers off their payrolls. The truckers that haul containers out of the ports have been a target of the unions for a long time. The AB5 law forces more drivers to be classified as employees, subject to California’s labor laws.
So, to make a long story short, Uber, Lyft and Door Dash funded a 2020 ballot question, Proposition 22, which won them exemption from AB5. This is now tied up in court, so we will put this group aside for our discussion about the truckers. Also, another bill was passed in 2020, Assembly Bill 2257, which exempted specific categories of self-employed white-collar and blue-collar workers, but still not the truckers.
What About the Truckers?
California Trucking Association v. Bonta is the 9th Circuit case that had AB5 tied up in court… all the way to the U.S. Supreme Court. The CA Trucking Association had hoped SCOTUS would choose to hear their appeal.
In the afterglow and intensity of the Roe v. Wade bombshell, all the focus was off the topic of California employment classifications. The talk around trucking was hopeful that the independent contractor status-quo might survive, at least for now.
You might imagine then, that the decision landed like a turd in the punchbowl. SCOTUS would not be hearing the appeal. Not this time and not next time. Not any time.
Now What?
Trucking companies are scrambling to come up with some kind of solution fast. They are left on their own to come up with ways to comply with the law. Lawyers are weighing in with advice on how to restructure owner-operator lease agreements.
The CA Labor & Workforce Development Agency will be investigating any complaints of employee mischaracterization.
Which Drivers Are Affected?
There are a couple different ways that owner-operators set up their businesses. There are the traditional owner-operators that run everything themselves. They have their own authority to be a trucking company. They file all their own highway taxes. They pay their own insurance. They run their own businesses and they book their own loads from a broker. As long as they are not being directed on how to do their work, these truckers are not the ones affected by this law.
So which drivers are affected? These are the owner-operators that sign-on with a single trucking company. They may own their truck outright, or they may lease the truck from the company. They run under the carrier’s authority, which means the carrier pays the highway taxes and insurance. The company finds the loads. The driver buys their own fuel, and they may get a fuel surcharge as prices rise. This is a popular way to get into being an owner-operator because the company does the tax filing, the insurance shopping, and the rate negotiating for the driver. There are A LOT of these owner operators out there.
Anyone living and driving in CA under the authority of a trucking company will be under scrutiny. The port drivers know they will be the first to be targeted. Questions surround whether or not a non-California driver can still come into the state and pick up loads while under a trucking company’s authority. Whose state labor laws apply under what conditions? What if the trucking company has a base in CA as well as other states? There is uncertainty around how far reaching AB5 could be, and until there are rulings and court challenges, questions will remain.
Port Drivers Begin to Protest AB5
This week, there were hundreds of port drivers out protesting AB5. Rather than picking up loads, they were outside demonstrating. Many of them drove their trucks slowly on the freeways, attracting attention to their cause. These port truckers are happy with their current owner-operator lease agreements and are determined to keep things this way. They know they are being targeted by AB5, so this is their last hope to create a political solution for a political problem.
Containers are backing up in the ports. Unions are negotiating new contracts. AB5 is just the latest in a series of problems creating delays in California’s ports. Will there be more protests or will this be resolved somehow? Right now, it looks like a stand-off.
Some Over the Road Truckers May Just Avoid CA Altogether
California has a lot of freight. Asian manufacturing is shipped through the west coast ports. Silicon Valley and the Central Valley ship high-tech electronics and low-tech produce. Almost 12% of the U.S. population lives there.
There are truckers who just refuse to go into CA altogether. More and more, truckers are saying, “just don’t go there.” Environmental laws make older trucks illegal. Diesel fuel is expensive, and the truck speed limit is 55. The AB5 law will add more truckers to those who stay out of California completely, which will add more inefficiencies into the system.
Potential Solutions
What may have to happen is that most of the affected owner-operators will have to choose whether to become employees or apply for their own authority. I’m guessing that at this time, with high fuel prices and an uncertain economy, most would probably choose to take the safer route of becoming company drivers. Perhaps the company would pay to lease back the truck from the driver. These arrangements might take some time to be negotiated.
If instead, the driver chose to apply for his own authority, there could be a month or two wait for all of the paperwork and insurance to get finalized.
After considering these options, some drivers may choose to leave trucking altogether. These are issues that come up when we look at possibilities of disruptions in our supply chain.
All Eyes on California
Many laws that begin in California spread across to other states. There is speculation that the AB5 law will be replicated in other states. If this happens, there will be a lot of restructuring to come for the trucking business.
In the near term there will be supply chain disruptions and added costs. Now the question becomes, how much impact will this foreseeable, yet sudden, predicament create?
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Robin Peterson
Robin has been a long haul trucker since 1996, has her ear to the ground, eyes on the road, and finger on the pulse – reporting timely insights and observations on supply chains and the trucking industry.
11 Comments
tex2519
I STRONGLY suggest you move to a red (trucker friendly) state. Texas is a great state.
However, there are 24 others to choose from !
SoCalGal
This is one more reason why people are leaving California. Everything Dems do in this state hurts the citizens and they don’t care.
jake
I’m seriously considering your recommendation TEX2519. I’m a native Californian and no longer recognize my once wonderful state. It seems like we’ve been taken over by the WEF and their minions. Scary!
Bill Boehm
I’m also a truck driver and have worked as a lease contractor with companies and just like the traditional owner ops, we are all concerned. Thank you very much for the dig Corey, you always provide a thorough round table with solid Q andAs. Will be looking for an update as we gain more understanding and potential options come about. Godspeed
Bill
BMadre
This has been a possibility for years and I sympathize with those independent truckers. Sad they waited on court outcomes instead of pushing a “plan b” sooner. I’ve heard Amazon gets all its Asian goods out of another state so it wouldn’t have to deal with the strict laws and regulations in CA. If consumers knew what companies keep getting their goods shipped to CA ports, we could have helped try to persuade them thru boycotts, public discussion or protests along with our trucker friends…. imagine how much more could have been accomplished during the years long wait on a court outcome!
Barbara E Rush
I’ve thought about this before. I’d structure my company into two: one that operates from California and one that doesn’t. The California company delivers to a warehouse outside the California border. The second company then delivers the loads wherever required. You could ease the regulatory burden on interstate shipments. It doesn’t help California intrastate trucking companies, though.
Spencer
The government will ultimately move to own the supply chain.
Peggy Pena Smart
Park the trucks in California, Californians will come round when all stores are bare and they cannot get the goods they buy on line..(My Dad Bumpy Pena trucked in California all his life.) This is the way of democrats get Newsom and all that liberal crap out of California and the state will be Golden again until then it a real terrible place to live and without freedom why stay…Go east to Florida…..
RedSheep
I say just shut out California and any other stupid state that makes similar laws. The shippers in Asia will learn soon enough about how their freight is not getting hauled and the whole debacle is just adding to the current problem of getting shipping containers unloaded, yada yada yada. They may start shipping to other ports in shipping friendly states, they have to to get their goods to market or let their company go down the drain. I would rather not ever purchase another product of China, but there are a number of Asian countries such as Vietnam and Taiwan who are emerging economies, align with the US culture, that could use good honest trade with the US. If enough freighters are going to the port of Houston, the cost would come down from doing so.
I believe that this bill is just part of the movement to clip the wings of independent contractors and make them subservient to a company/employer, so they are forced to do what that company says (ie take a vaccine, etc) or they are dismissed. That it also contributes to the breakdown in the supply chain is an added benefit for the globalists.
States will be the deciding factor in this globalist push to starve the people of jobs, food and other necessities. Make sure you vote for and promote that are America First. We must build parallel modes of doing business and if that means that the states are split between blue ignorant globalist ones who will die on the vine and red America First ones that promote freedom of industry and person and will thrive, so be it. In the current situation, I cannot see another solution and I am not disposed to think that trying to compromise with leftist globalists will do anything but continue ruining our lives, our livelihoods and our rights to life, liberty and the pursuit of happiness.
Michael
The trend in Containers has been moving towards owner operators under a Company. What California legislators are doing is attacking the working class independent drivers. They are also hitting the small to mid level trucking companies that find it more profitable to operate with less overhead expenses by contracting with owner operators. California legislators are violating interstate commerce laws under this bill. It is also unconstitutional. To bad unions are getting blamed for the attack on civil liberties considering they were formed in order to defend individual sovereignty in the workplace. Need to get the bad apples out(bad legislators and union reps). Running away to a different state isn’t a viable solution if we are to remain a United States.
Kelley McCrory
Thanks for well written article. The sad reality Our Country is facing is we are being dismantled from the inside out. My father was a trucker years ago. I LOVE Truckers and appreciate ALL y’all do!! Without y’all we are screwed. Which is exactly what these “people” want. Please keep fighting back and know that there are millions of us who appreciate you!