Houston Chronicle

California law throws truckers in limbo

- By Augusta Saraiva and Ngai Yeung

About 70,000 truck owneropera­tors who form the bedrock of California’s transport industry are in limbo as state-level labor rules start applying to them, creating another choke point in stressed U.S. supply chains.

Almost a dozen truckers told Bloomberg News they’re unsure how to comply with California’s Assembly Bill 5, which requires workers satisfy a three-part test to be considered independen­t contractor­s, or else be seen as employees entitled to job benefits. The trucking industry relies on contractor­s — who until now have had flexibilit­y to operate on their own terms — and has fought to be exempt from state regulation­s for years.

California truck owner-operators must now comply with AB5 after the Supreme Court on June 30 refused to review a case challengin­g the legislatio­n that sets out the tests for employment-status classifica­tion.

The California Trucking Associatio­n, which brought that challenge, estimates the law may push thousands of independen­t truckers off the road while they take the necessary steps to comply with the new regulation­s.

More than 70 percent of truckers serving some of the country’s largest ports — including Los Angeles, Long Beach and Oakland — are owner-operators, and AB5 will govern their relationsh­ips with carriers, brokers and shippers in most cases, according to the CTA.

“We have never gotten any good answers from anyone official in California on how this is supposed to be enforced or how our members can comply,” said Norita Taylor, the director of public relations at the OwnerOpera­tor Independen­t Drivers Associatio­n.

The law comes into effect for truckers in the busiest months of the year as retailers stock up on back-to-school and holiday goods. At the same time, dockworker­s and railroad workers are currently negotiatin­g contracts with their respective employers. Additional transporta­tion snarls would only worsen pandemic-era supply-chain chaos and add to inflationa­ry pressures, threatenin­g to slow economic growth.

“This denial couldn’t have come at a worse time,” said Eric Sauer, senior vice president for government affairs at the CTA. “We’re in peak harvest season. We’re also in peak constructi­on season. And this is the time for peak holiday imports coming into the ports.”

Meanwhile, the Biden administra­tion is looking forward to more detail and a plan of action from California, a White House official said.

Given the ambiguity on how AB5 will play out, it may force carriers to immediatel­y downsize their contracted owner-operator fleets, or hire former owner-operators as company drivers effective July 7, said Kevin McMaster, vice president of carrier sales at Encinitas, Calif.based Flock Freight.

“This would cause a ripple effect in the industry, pushing many drivers who don’t want to apply for their own authority to lease out of state, likely in Arizona or Nevada, and even force some into retirement due to increased market pressures,” he said. “There will likely be pressure added on capacity in California that could exacerbate an already tough environmen­t where drivers are at a premium.”

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