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Law AB5 will affect more than 70 thousand truckers in California

Law AB5 will affect more than 70 thousand truckers in California

This law was approved by voters in 2018 when the state presented the proposal for this law in the elections of that year due to pressure from unions in the transportation industry, arguing that this law would bring benefits to employees in the informal economy. Of which more than 70 thousand owner-operators or independent contractor drivers are part of the employees classified as informal.

What is the AB5 bill?

AB5 passed by the California State Legislature and signed into law by Governor Gavin Newsom in September 2019, effectively reclassifies a large number of workers in the state as employees rather than independent contractors.

It was initially championed by unions throughout California as a way to bring employee benefits into the informal economy. AB5 replaces the existing way to classify workers. Establishing a three-point test, classified as the “ABC test” indicating that a worker is an employee, unless they meet each of the following models:

  1. They are free from the control and direction of the contracting entity when performing their work. That is to say that the drivers cannot be controlled, they do not receive orders and does their job according to what their wishes.
  2. The work performed is outside the normal course of business of the contracting entity, that is, it is not under the administrative policies of the company that contracts it.
  3. The worker is habitually engaged in an independently established trade, occupation or business. In the case of an independent contractor, they must have their own permits, licenses, insurance, pay their maintenance, fuel, establish their own accounting and administrative control system.

Certainly, AB5 includes the transportation industry despite the fact that the Supreme Court of the United States established an injunction at the end of 2019, however, on June 30, 2022 the measure was annulled, establishing that the AB5 law could be effective 8 days later.

This law affects more than 70 thousand independent truckers. Among these there are several groups, some of which are in favor and others against. For example, in the port sector, there are drivers who, with the help of unions, have unsuccessfully sought classification as employees due to the unfair compensation they have received for decades for their services. This has resulted in the Shipping Lines and the large transportation companies that control this sector becoming more and more economically powerful and the older truckers without a good retirement plan and condemned to live in misery.

The sector that is generally against it is the one that does not want to be controlled and be independent, even though that means they have to pay high taxes, high insurance costs, and maintenance.

Taxes at the Wheel


Edic.: 181
Autor: Gustavo Nuñez
Date: 8/2022