Motor Carriers Will Need to Learn the ABCs of AB 5

On June 30, 2022, the U.S. Supreme Court denied a petition by the California Trucking Association (“CTA”) that sought to reverse the Ninth Circuit’s ruling that California’s Assembly Bill 5 (“AB 5”) was not preempted by federal law as it applied to truck drivers. The decision by the U.S. Supreme Court effectively deems California’s AB 5 applicable to independent owner-operators providing trucking services for motor carriers.

As we previously reported, AB 5 was a law passed in California that used the “ABC” test to define who was qualified to be independent contractors. Essentially, the “ABC” test provides that all workers should be considered a company’s employees unless they can satisfy the following three prongs: (A) free from the control and direction of the hiring entity, (B) performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Given the nature of the work by independent owner operators, it is basically impossible for owner-operators to satisfy prong “B” (and thus be deemed independent contractors) as they perform the same work as motor carriers.

With this denial by the U.S. Supreme Court, the preliminary injunction against the implementation of AB 5 against motor carriers will be lifted. According to the CTA: “In addition to the direct impact on California’s 70,000 owner-operators, who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation.”