The CA AB5 “gig worker” law is now in full effect. Governor Gavin’s proposed 2020 budget includes $20 million in additional funding for enforcement. On January 13th, the California courts extended a restraining order keeping the state from enforcing CA AB5 in the trucking industry. However, we’re still keeping a close watch on this developing situation and the potential impact of CA AB5.
F|Staff CEO Justin Clarke recently spoke with Heather van Blokland of local radio station KJZZ, discussing the potential impact of CA AB5. Across the trucking industry, carriers and drivers, both in and out of California, are pushing back.
The impact of CA AB5 on carriers and drivers
If the California courts end up ruling against the California Trucking Association, and CA AB5 goes into effect for our industry, the process of doing business will change for many carrier companies overnight.
“It’s the businesses that have extended 1099s to individuals,” Justin Clark said during his interview. “It affects contractors who may be more like an employee: lacking control over their growth, lacking control over when they start when they stop work.”
The industry has operated for decades by hiring contracted drivers on 1099s. CA AB5 requires companies to convert those workers to W2 employees. The change will increase costs for employers, which could lead to decreased opportunities for drivers as a result.
Additionally, the changes will take time to understand and implement.
“There are hundreds, if not thousands of trucking companies in California alone that operate underneath [the 1099] business model,” Clarke said. “It’s going to take time before we can actually make the changes that this regulation would cause us to make. I’m fearful that few Californians are even ready, and neither is the rest of the country.”
It’s not just a California issue
Carrier companies across the country are watching the development of CA AB5 closely, and for a good reason. As Clarke noted, “The trucking industry is mostly governed by Federal Motor Carrier safety regulations and Department of Transportation, which are federally mandated. We don’t see as many state-by-state regulatory issues.”
Because of the nature of the trucking industry, laws that drastically change at a state level affect any company doing business inside that state, even if their headquarters are elsewhere. A law like CA AB5 increases the complexity of doing business across state lines.
Rethinking business models in the face of CA AB5
While the matter remains tied up in court, California carrier companies prepare their businesses ahead of the potential change. “We have been talking with companies in California,” Clarke said, “And they are still going through the changes and trying to figure out how they will move forward after AB5 goes into effect.”
An increasing number of carrier companies are embracing the idea of driver leasing. By adopting solutions like F|Staff, carriers in California gain access to an on-demand staff without increasing cost or risk to their businesses.
“We’re here to support the labor shortages that the supply chain sector has from time to time,” stated Clarke. “We pre-screen quality candidates and make them available to our clients.”
With F|Staff, carrier companies can reduce the time and cost of credentialing, screening and hiring drivers. And, since F|Staff drivers work on W2, your business remains protected from CA AB5 enforcement.
Get started with driver leasing
F|Staff has drivers in California and across the United States who are prequalified and ready to drive your trucks. Get started using the F|Staff app today. After a rapid onboarding process, you’ll have the drivers you need, right when you need them.