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What the bill will mean for Uber and Lyft has drawn attention. But the trucking industry is bracing for changes as well.
As a California bill that is intended to set new limits on when companies can classify workers as contractors headed to Gov. Gavin Newsom’s desk this week, Thien Tran was worried about his livelihood as an independent trucker.
“I'm kind of stuck,” said Tran, who owns and drives a 2009 heavy-duty dump truck. “I don't know what I'm going to do.” He gets work through brokers and says he typically nets about $70 an hour after expenses.
But Tran's concerned that Assembly Bill 5 will bring an end to all that, with its restrictions on hiring independent contractors for “gig” work. If he takes a job full-time with a trucking company, he expects his pay would drop to around $30 an hour, which he said is not enough to live on with his family of four in the Bay Area.
“It's all up in the air,” he said, noting that he has a mortgage and other expenses he took on based on the level of income he has been earning. Still, he described himself as luckier than other “owner operators” because his truck is at least paid off. “They’re all stressing out.”
AB 5 gained final approval in the Legislature on Wednesday and Newsom, a Democrat, has signaled he plans to sign it. The bill could serve as a model for similar legislation in other states.
Much of the attention around the largely Democrat-backed bill has focused on how it would affect tech companies, like the app-based ride-booking giants Uber and Lyft, who depend on drivers classified as independent contractors to ferry passengers.
But people involved in the trucking business in California say that it’s going to have dramatic effects on their industry.
“It's actually huge,” Joe Rajkovacz, director of governmental affairs and communications for the Western States Trucking Association, said when asked about the ramifications the bill would have. “It's going to reshape the marketplace in most of trucking.”
He and others say it’s unrealistic that trucking companies will hire all of the owner operators on the road today, or buy their trucks.
And as a result, critics of the legislation argue that drivers like Tran, some of whom have sunk tens of thousands of dollars into trucks, could be forced to sell their rigs and incur heavy financial losses. Or they might need to look for work as owner operators in other states.
“It's pure wishful thinking on the part of labor that these owner operators are simply going to just convert themselves into employees,” added Rajkovacz, who worked for nearly three decades as a trucker, both as an owner operator and as a union driver.
He and others acknowledge that there were bad actors in the trucking business who were misclassifying drivers. Most say that this was especially a problem at ports in Los Angeles and Long Beach. “The sins of a few,” Rajkovacz said, “have been extended to everybody.”
The International Brotherhood of Teamsters, the nation’s largest truck driver union, is applauding the bill. They frame it as a major win for truck drivers, and take the position that there’s a “false narrative” being spun that AB 5 is going to end up hurting owner operators.
“I think no doubt the landscape will change,” Shane Gusman, legislative director at the California Teamsters Public Affairs Council told Route Fifty. “But a true owner operator, in business for themselves, will still be able to get work.”
“I know some of them out there are scared of change,” he added.
Gusman said under AB 5 owner operators can contract directly with clients who have freight that needs to be hauled, or they can take work as employees with trucking companies. It’s not that uncommon, he said, for trucking firms to hire drivers who own their own trucks as employees and then reimburse them for the use of their equipment.
“What you aren’t going to see anymore is kind of the middleman broker who is basically just sucking 30 percent off the top from these drivers,” Gusman said. “This has been an exploitation model for three decades in the trucking industry at least and we’re happy to see it go.”
Classifying workers as full-fledged employees, rather than contractors, puts companies in a position where they have to cover additional costs, like payroll taxes, health benefits, and workers compensation insurance to cover employees injured on the job.
Assembly Bill 5 codifies a three-part “ABC test,” to guide worker classification decisions. Under the test, a person can be considered an independent contractor only if the employer hiring them can establish the worker meets each of the test’s three criteria.
The first prong of the test says that the worker must be free of an employer’s “control and direction” in doing their work. The second says the person's work must be outside “the usual course” of the employer’s line of business. And the third prong says the worker must be regularly engaged on their own doing work that is like the work that they’re doing for the employer.
California state Assemblywoman Lorena Gonzalez, a San Diego Democrat, authored AB 5.
Her office did not respond to requests for comment. But she said in a statement that the bill’s passage made clear “we will not in good conscience allow free-riding businesses to profit off depriving millions of workers from basic employee rights that lead to a middle-class job.”
For owner operators, the rub lies in the second prong of the ABC test, because independent truckers and trucking companies are both in the same line of business.
Debbie Ferrari has worked in trucking for 38 years, since the early 1990s in operations with a firm out of Hayward, California. The company has a stable of about 12 trucks and 10 or 11 employee drivers, and also works with around 150 owner operators.
The owner operators have always had an option to come on as full-time drivers, but most opt not to, Ferrari said. “They see that we have trucks sitting in the yard with no drivers in them,” she added. “They see we have ads placed in the paper.”
For some owner operators, a key perk is they can take jobs when and where they want to. Employee drivers typically have less freedom.
Ferrari said she wasn’t active in Sacramento politics in the past, but became heavily involved in lobbying for an exemption to the bill that would cover owner operators who meet certain criteria. She stressed that she took up the issue on her own, not on behalf of her employer.
“At first I had no clue what to do,” she said. “I didn’t even know the difference between state and federal.” Ferrari said she took dozens of meeting with lawmakers and their staffers to try to plead the case for why some independent truckers shouldn’t be subject to the ABC test.
“It’s been one and a half years of brutal disappointment,” she said. The way Ferrari tells it, she and others pushing for an exemption for the owner operators found themselves up against powerful union interests who had a great deal of sway over the legislation.
“The Teamsters are desperate to increase their membership,” she said.
Asked about this sort of criticism, Gusman, with the Teamsters, replied: “Sounds like sour grapes to me.” He said that naturally the union wants to grow it’s ranks. “What union wouldn’t want to grow its membership,” he said. “We’re not growing it in an illegitimate way.”
Gusman also pointed out that the California Supreme Court already blessed the ABC test last year in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County. He contends that the legislation will make the standard easier for regulators and courts to enforce, while cutting down on costly worker misclassification lawsuits.
Ferrari doesn’t voice opposition to AB 5 in its entirety and says it may actually help some truck drivers, like those working at the ports.
But she’s adamant that many owner operators are unlikely to come out ahead. Ferrari and others urged lawmakers to adopt a special framework that outlined conditions for when owner operators would be allowed to work as independent contractors.
Some lawmakers, she said, seemed supportive of what she and others concerned about owner operators were pushing for. But this wasn’t enough. “Now our only hope is to try to get a clean up bill,” Ferrari said. “We’re grasping at straws.”
There was some language inserted into Assembly Bill 5 that Rajkovacz, with the Western States Trucking Association, explained provides a narrow pathway for owner operators to work in the construction sector under certain circumstances.
But Ferrari says it’s flawed and lawmakers are “using it as cover to say there’s a trucking fix.” And Tran, who owns the dump truck, says he’s uncertain he’ll be able to find enough work this way, partly because of how many other drivers he suspects will be pursuing the same option.
Thang Nguyen, is another trucker who says AB 5 will likely put him in a tough spot.
He said he bought a new truck for around $200,000 a little less than a year ago that he had planned to pay off in two or three years. If he tries to sell the truck now, he’ll probably take a big financial hit.
“If I have no choice, I have to move out of state if I can’t operate,” Nguyen said. “I'm not going to give up my truck for $100,000.”
In the wake of the Dynamex ruling, The California Trucking Association, along with two owner operators, filed a lawsuit arguing the ABC test was preempted under a 1994 federal law that set restrictions on state regulation of the trucking industry.
That lawsuit remains pending.
“We are in the course of evaluating our legal options in light of the passage of Assembly Bill 5,” CTA’s CEO Shawn Yadon said by email on Thursday. “No decisions have been made to date.”
Uber, Lyft, and a delivery service company called DoorDash, have pledged that they will spend $90 million on a ballot measure aimed at getting carve outs from AB 5 for workers they rely on.
It’s possible that the trucking industry could find a way to get involved in the ballot measure effort, but still too soon to say, Rajkovacz said.
Tran, who said he doesn’t oppose AB 5 in general, joined Ferrari in meeting with lawmakers to press for changes to the bill. “They’ll speak to us like they care,” he said. “It just frankly angers all of us truckers that they want to lump the trucking industry in with Uber and Lyft.”
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Bill Lucia is a Senior Reporter for Route Fifty and is based in Olympia, Washington.