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California Fleets Impacted by new Subcontractor Law

Many owner-operators in the state of California are facing an uncertain future as a new law is set to take effect.

Assembly Bill 5 prevents for-hire and private fleets from working with the owner-operators as subcontractors. The bill was designed to limit who could be classified as an “independent contractor” versus an “employee” in the state.

Lawmakers who supported the bill were responding to the rapid increase of gig economy workers at companies like Uber, Lyft, and Door Dash. Those workers are typically not covered by the same legal protections as full-time employees such as minimum wage, sick leave, unemployment and workers’ compensation benefits.

The bill was voted into law in September and is set to take effect on January 1, 2020. It creates a strict 3-point test to determine if the individual is really an independent contractor rather than an employee. Those new standards include:

  • the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact
  • the worker performs work that is outside the usual course of the hiring entity’s business
  • the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

Uber and other companies with “app drivers,” are vowing to leave independent workers listed as contractors because they believe that they can meet the new classification standards. They have also pledged to each spend $30 million next year to get the bill rolled back.

Meanwhile, the California Trucking Association has partnered with those firms to fight the law and is also attempting to convince the legislature that the trucking industry should be exempt from the new law. But, the group faces an uphill battle. As the association says on its website:

“CTA and other industry associations will push hard for a trucking carve out next year, but it is highly unlikely anything will happen before AB 5 goes into effect on 1/1/2020.”

That has left many California-based trucking fleets erring on the side of caution. As CCJ magazine reported, some fleets are asking owner-operators to come in house and become employees or to move out of state where they would no longer be subject to the new law.

Is your firm impacted?

If so, and you need to provision trucks quickly for newly hired in-house drivers, Quality can help with ready, like spec’d, fleet-maintained trucks. See our inventory at https://qualityco.com/inventory or call our team of truck sales and leasing experts at 866-472-1120.

We’ll continue to watch the legal moves out of California in hopes a compromise can be found that keeps owner-operators in business and on the road!