AB5: California’s Fault Line

The US Supreme Court’s June 30 decision against accepting challenges to California’s Assembly Bill (AB) 5, has added another obstacle to the two-year battle between the state’s approximately 70,000 independent rig operators and the American judiciary.

The bill is a controversial bit of legislation that theoretically offers greater protection from labor abuse to self-employed truckers but in practice imposes stringent, ambiguously worded standards that dispute the “independent” classification of drivers who have for generations been their own bosses. AB5 passed in 2019, but was stalled as it traversed the legal system; with this summer’s decision, the bill has been returned to the lower court.

Consider the Numbers

California’s contribution to the trucking industry, both intrastate and outside its borders, is tremendous. This 2021 study that reviewed Southern California’s role in goods transport noted the region shipped more than 223 million tons of freight within the state, with shipments to the rest of the country accounting for 447 million tons. And, said the most recent US Census available, California truckers shipped a total weight of 580.6 million tons in 2017 (second only to Texas, which transported nearly 1.3 billion tons of goods).

This poses the question: does AB5 create an unworkable dynamic that holds California truckers to a regulation not found in other states? Drivers unable to operate interstate may relocate or shut down; business owners, fearful of not complying with the law, will seek other means of transporting cargo. And the result: seemingly unstoppable inflation and more uncertainty for America’s already-struggling supply change.

In a July transportdive post, David Heller, Truckload Carriers Association senior vice president of safety and government affairs, addressed these concerns.

 “Do they . . . say, ‘You know, maybe it’s time I get out?’” Heller said. “And if that becomes a problem, that makes the supply chain crisis even worse today than it was yesterday. This is the American dream in our industry, and it’s that person that decides to go out and buy one truck and start their own business, and it certainly puts a damper on that opportunity.”

Swift Reaction

Except for a small number of labor-based organizations that favor AB5, the reaction remained negative with trucking advocacy groups freely sharing their displeasure. The California Trucking Association (CTA), which, in 2019 filed suit against  AB5, because the bill would create economic hardship and impede the autonomy of independent drivers, said of the court’s decision:

“We are disappointed the Court does not recognize the irrevocable damage eliminating independent truckers will have on interstate commerce and communities across the state. The Legislature and Newsom Administration must immediately take action to avoid worsening the supply chain crisis and inflation.”

CTA joined 70+ trade organizations, among them the American Trucking Associations, Harbor Trucking Association, and California Chamber of Commerce that wrote to Governor Gavin Newsom, requesting AB5 be paused by executive order, and “negotiate a path forward to preserve small business trucking in the state of California and prevent further disruptions to the supply chain.”

Unwilling to remain silent were thousands of California independent truckers who spoke out from behind the wheel with protests that dominated major vehicle corridors, particularly those leading to the state’s waterfront trade centers (more than 40% of inbound container cargo passes through California’s ports; blockades can have a profound financial impact). 

Targeted were Northern California’s Port of Oakland, and Southern California’s 110 and 710 freeways and Vincent Thomas Bridge, all essential routes to Terminal Island, which services the LA Port Complex, the busiest port in the US. 

OOIDA Weighs In

Also seeking solutions for California’s truckers is the Owner-Operator Independent Drivers Association, Inc. (OOIDA ), a 150,000+ member-strong international trade organization.

Following the Supreme Court’s ruling, OOIDA president and CEO Todd Spencer penned a powerfully worded three-page missive to California Governor Gavin Newsom detailing the damage to livelihoods that AB5 will wreak, for individuals and on a global scale. Wrote Spencer:

“While enforcement of AB5 will create disruptions and challenges for the supply chain and economy in California and across the country, small-business truckers face the most immediate uncertainty and potential harm. Our members who live in the state, as well as tens of thousands of truckers who travel through it, are now wondering if they can continue working in the same arrangements they have for years—arrangements that benefit their operations. For some, this means they don’t know whether they will be able to make their next truck or mortgage payment. California must prioritize these drivers’ perspectives as it considers its way forward.”

In a recent episode of HDT Talks Trucking, DAT Freight and Analytics Principal Industry Analyst Dean Croke summed up the ripple effect: “...the impact will be far wider than most people think,” he said, adding, “Once you cross the border you are subject to California law. You have to front-load your inbound rate into California to factor the outbound deadhead–to where?”