August 5, 2022
On June 30, 2022, the California Trucking Association (CTA) was denied its request to have the U.S. Supreme Court hear its case about the state’s AB 5 contractor law and the residual impact that this law has on motor carriers and independent commercial drivers.
This means that the U.S. Court of Appeals for the Ninth Circuit’s ruling stands, and the leased owner-operator business model has been upended in California. The decision not to hear the case impacts carriers located in California and carriers around the country that historically have leased independent contractors to haul freight in California.
After the denial by the Supreme Court, many truckers protested at the seaports indicating the drivers wanted to keep their independent status rather than be considered employees of a carrier.
The California law, however, makes it difficult for independent drivers to be considered a separate entity from the carrier the driver contracts with. The law has a three-part test, commonly known as the ABC test:
All three of the above criteria must be true for the individual to be considered an independent contractor.
Independent contractors, also known as owner-operators, can haul freight in California under their own DOT number and authority, but not under a lease to a trucking company. An independent contractor leased to a carrier runs under the carrier’s DOT number and in CA that is no longer allowed under AB5.
Carriers that previously used leased drivers in California may need to examine their current structure and potentially adapt their business model or hire the operators as company drivers.