Moving Words – AB-5
Timothy Brady
“I love rules and I love following them, unless that rule is stupid.” -Anna Kendrick
Nearly everybody in the moving industry knows about AB-5, the California Independent contractor law that put the vast majority of people who do freelance contracting for many industries into being employees. This could be a game-changer for the moving industry because of how the majority of the work relationships are structured as contract labor. This impacts van operators to local movers to pack crews to those who load and unload moving vans for van operators. I interviewed Gregory M. Feary, partner and president at Scopelitis,Gavin, Light, Hanson, & Feary, P.C., a Transportation Law Firm.
(For Feary’s biography go to https://www.scopelitis.com/attorneys/Gregory_Feary/ )
On January 16, 2020, California Federal District Judge Roger Benitez granted a preliminary injunction in California Trucking Association v. Beccera. The order enjoins the State from enforcing AB-5 as to any motor carrier operating in California pending entry of final judgment in the case by the District Court.
On January 28, 2020, I asked Feary the following questions as to how AB-5 and current litigation will impact the moving industry:
Please explain the Federal Regulation governing why the FMCSA requires motor carriers to contract with truck owner/operators under an exclusive use contract to haul the motor carrier’s freight.
Feary: The exclusive use possession and control language found in 49 CFR 376.12(c) is to ensure that members of the motoring public look to the motor carrier rather than the owner/operators when a road accident is caused by an O/O that injures or damages property.
With respect to the Household Goods hauling industry, does that same Federal Regulation apply to truck owner/operators contracting to a van line, one of their agents, or to an independent moving company?
Feary:Yes, as long as the movement is interstate (across states lines or a continuation within a state of an out-of-state move).
What if the freight the Owner/Operator hauls is being shipped within the state of California or being delivered locally for the van line agency’s or moving company’s warehouse?
(Example: The local Owner/Operator owns a straight truck and performs local pick-ups and deliveries from the agent’s or moving company’s warehouse, along with packing into boxes a shipper’s belongings in preparation for a local move by the local contractor, or interstate move by a long-distance Owner/Operator.)
Feary: If the movement or freight are originated and destined wholly within CA that would be an intrastate move—but CA is one of a very few states that has a leasing regulation very similar to the federal 49 CFR 376.
When the AB-5 looks at the business relationships between lumpers (casual labor) and the agent, or the Truck Owner/Operator or local hauling contractors:
When are these “lumpers” considered employees under AB-5?
Feary: AB-5 does not deem workers employees per se (with the exception of a certain provision applicable to construction trucking) but prescribes the ABC test to be applied by court—and that test usually results in employment of a court deems the workers as in the same course of business as the hiring entity.
If lumpers are classified as employees, whose employees are they? Employees of the Agency? Owner/Operator? Local Hauling Contractor? Temporary Labor Company?
Feary: This tends to be fact sensitive and often depends on the contractual AND operational relationship between the lumper and the source of direction and control.
What legal documents does an Agency, or Owner/Operator, or Local Hauling Contractor need to prove the lumpers with whom they contract are independent, casual labor and not employees?
Feary: Generally, the independent contractor agreement is a key document but there are other operational documents that memorialize a course of operations that can be instructive.
Please explain the AB-5 Preliminary Injunction Granted in California Trucking Association v. Beccera as it relates to the moving industry.
Feary: Federal Court Judge Benitez determined that AB-5’s ABC test has the effect of prohibiting motor carriers from using owner-operators as independent contractors. As such, the law has an impact on prices routes and services of motor carriers—an area of regulation reserved to the federal government not state governments.
Hopefully this information will help you clear up the murky waters caused by AB-5. For more details and updates as this continues through the courts, visit Scopelitis, Gavin, Light, Hanson, & Feary, P.C. website and check their News & Analysis, Transportation Briefs® and Transportation Law Alerts.
