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Trucking Industry May Avoid Strict Rules Imposed By California AB5

 Posted on January 22, 2020 in Employment Taxes

San Jose business law attorneyPerhaps no other piece of California legislation has caused as much of a stir in recent years as Assembly Bill 5 (AB5). The bill was signed into law in September 2019 and went into effect on January 1, 2020. AB5, nicknamed the “gig worker bill,” significantly limits when employers can classify workers as independent contractors. Many companies that rely heavily on independent contractors are concerned about how the legislation will affect their ability to stay in business. The trucking industry has been one of the most vocal critics of the bill, and some recent developments may affect how these companies will operate going forward.

California Trucking Association’s Lawsuit Regarding AB5

Assembly Bill 5 instituted an “ABC test” for determining whether a worker can be classified as an independent contractor. According to AB5, all workers must be considered employees unless the following three criteria are met:

  1. The worker is able to carry out services free from the direct control of the company.
  2. His or her work tasks are not part of the company’s usual course of business.
  3. He or she is performing work that is of the same nature as that which he or she is ordinarily engaged in.

Many trucking industry employers and workers are especially concerned with part B of this test. Along with two owner-operators, the California Trucking Association (CTA) filed a lawsuit to fight the new restrictions regarding worker classification. The association argued that the legislation will threaten the livelihood of over 70,000 truckers who are currently classified as independent contractors. The CTA further contends that the new restrictions implemented by AB5 conflict with the Federal Aviation Administration Authorization Act of 1994 and the Federal Motor Carrier Safety Act.

California Judge Offers Temporary Reprieve for Truckers

On December 31, 2019, a temporary restraining order was issued by a California judge that prohibits enforcement of AB5 as it relates to motor carriers in California. Days later, the judge extended this temporary reprieve granted to trucking employers. On January 16, a preliminary injunction was granted that indefinitely extends this restraining order until the California Trucking Association’s challenge is resolved. For now, the future of the trucking industry in California remains unclear. Many other industries are likely to continue battling the new legislation in the coming months and years as well.

Contact a San Jose Business Lawyer for Help

If you are worried about how AB5 will affect your business, you are not alone. Many business owners and employers are looking for ways to avoid the strict new rules regarding California worker classification. The law is complex and constantly changing. For sound legal guidance regarding tax concerns, compliance issues, independent contractor agreements, and more, contact an experienced San Jose, CA employment tax lawyer at John D. Teter Law Offices. Schedule a consultation to discuss your concerns by calling us at 408-866-1810 today.


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