California’s Assembly Bill 5 (AB5)

blog | Jul 18, 2022

California’s Assembly Bill 5 (AB5)

AB5 went into effect on January 1, 2020 and it addresses a worker’s employment status when a hiring entity claims that the individual it hired is an independent contractor. 
AB5 assumes that all workers are employees, unless the company can prove that the worker is an independent contractor. In order to be determined as an independent contractor, the worker must meet all three of the following requirements of the ABC test. 

  1. The worker is free to control and direct his or her own work performance without interference of the hiring entity; 
  2. The worker’s duties and/or services are outside of the hiring entity’s usual course of business; and 
  3. The worker is customarily engaged in an independently established trade, occupation or business. 

What Does AB5 Mean for You?  

Leased owner-operators operating as independent contractors are at issue under AB5.  

Business capacity owners are no longer permitted to enter into lease agreements with motor carriers for the exclusive right to their services and the use of their equipment. 

Instead of owning trucks or employing drivers, most motor carriers work with owner-operator truck drivers. These drivers have traditionally been hired as independent contractors, AB5 may change their classification.  

For the drivers who are reclassified as employees, AB5 entitles them to the same benefits and protections that regular employees receive, which means freight transportation costs might soon begin to rise. 

For additional information and assistance, please contact your local Delmar Representative.