In September of 2019, Governor Newsom signed AB 5 (Gonzalez) into law, which went into effect January 1, 2020. The California Trucking Association (CTA) filed suit against the California Attorney General asserting that AB 5 is pre-empted under the Federal Aviation Administration Authorization Act of 1994 (FAAA).
CTA was initially successful at the trial level and obtained an injunction from enforcement of AB 5 but lost at the 9th Circuit Court of Appeals. On June 30, 2022, the U.S. Supreme Court denied CTA’s Petition for Certiorari, effectively ending the case and the stay of implementation of AB 5 in the California trucking industry.
How does this affect truckers and the California supply chain?
Unless some sort of administrative action is taken, Owner-Operator/Independent Truckers are now prohibited under AB 5. They will not qualify for the business-to-business exemption under AB 5 and cannot negotiate their own rates with the motor carrier pursuant to Federal law. Owner-Operators lease their services and trucks and lack independent operating authority. Further, the specific requirements of AB 5, which require a separate business location and contracting requirements, are also a barrier for owner operators due to the requirements of the FAAA.
After the decision was announced, CTA stated “In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation.”
Additional information on AB 5 can be found here. For any questions regarding California’s labor code, please contact Jacob Villagomez at Jacob@CaCitrusMutual.com.