A new California labor law is controversially combatting worker misclassification, and ensuring independent contractors are recognized as employees–but is being temporarily blocked in the trucking industry.
The law would put into place regulation allowing gig economy workers, who often work on a flexible basis, to now be given the same benefits as formal employees. It went into effect on January 1st and is currently seeing heavy pushback from the tech and trucking industries–in which many of these freelancers work–as well as from lawmakers promising to work to change the legislation.
The federal court issued a temporary injunction earlier this month that would prohibit the rules to apply to truck drivers–creating a major issue with federal law.
When Assembly Bill 5 was implemented, it also created a test for whether or not an individual working for a company is an employee or an independent contractor. Consequently, the law means ride-share drivers are treated as if they are exploited by their businesses.
If classified as an employee, the worker must become eligible for full California employment protection, and cannot opt out of the classification regardless of whether or not he or she would prefer to continue working independently.
On the other hand, AB 5 would allow more than a million independent contractors to have rights to health care, a minimum wage, and the ability to join a union. The focus is to disallow companies to circumvent basic labor protections for anyone working for them.
However, with a bar on enforcement for the trucking industry, the question of whether or not states can regulate interstate motor carriers is revisited. Trucking companies are saying the new three-part test is stricter than previous standards, and would block the common use of independent contractors to haul freight–a widely-used practice in the industry to find independent owner-operators to carry out interstate jobs.
“With AB 5, California runs off the road and into the preemption ditch of the FAAAA,” wrote Judge Roger T. Benitez of the U.S. District Court for the Southern District of California in a Thursday ruling on a lawsuit filed by the California Trucking Association, along with truckers Ravinder Singh and Thomas Odom.
The judge blocked the state from enforcing the law on California motor carriers in a preliminary injunction “pending the entry of final judgment in this action.”
Judge Benitez wrote that there is “little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking.”
The court concluded that to allow enforcement on owner-operator truckers would bring about irreparable harm to the industry. According to the judge, unless companies change “their business operations to treat independent-contractor drivers as employees for all specified purposes under California laws and regulations,” they will risk potential criminal and civil penalties.
Although the injunction is only at a preliminary stage, it is not likely the state will prevail if the case does ever end up in trial. Additionally, the judge’s finding that the plaintiffs would most likely see victory will put enormous pressure on California to find a different angle on this issue.
The order could also affect similar potential proposals in other states, and deter the groups currently working to see these regulations take place elsewhere.
Shawn Yadon, California Trucking Association chief executive officer, said this ruling is “a significant win for California’s more than 70,000 independent owner-operators.”
Many companies with ride-share and delivery drivers, such as Uber and Postmates, say AB 5’s exemptions deem the law “irrational” and a violation of equal protection.
Although the bill’s main sponsor says its goal is to protect the “more than a million Californians” who “have been misclassified by employers looking to cut costs at the expense of workers,” how can anyone know which workers are truly misclassified when we don’t know exactly what they want? Many workers will continue to prefer an independent contractor’s flexibility.
Although the statute is legal, that doesn’t mean it’s necessarily a good idea. As of now, it may be the case that some gig workers do experience exploitation for the companies they work for–but is the solution to take the freedom to choose away from everyone else?