A California Supreme Court decision has made it much tougher for trucking companies to use owner-operators in the state. The Western States Trucking Association, in fact, says the ruling will effectively end the practice. The group plans to challenge the ruling, potentially setting up a U.S. Supreme Court challenge.
The court ruled that Dynamex, a courier and delivery service, misclassified its couriers as independent contractors to cut costs. So the court decreed that certain workers, in particular transportation drivers, should be presumed employees instead of independent contractors when evaluating wage and hour classification in class action cases.
The burden of proof is now on the company using an independent contractor to make sure the classification is proper under the newly adopted “ABC” test:
A: that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
B: that the worker performs work that is outside the usual course of the hiring entity’s business; and
C: that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
“Most legal analysis of the ruling agrees the ABC test sets an impossible standard for most of our members to meet,” said WSTA in an announcement to members.
It’s the second part of the test that is problematic, explains Rob Moseley, a trucking attorney with Smith Moore Leatherwood. “If you’re in the trucking business, it’s going to be a very difficult fight, because the B prong of the ABC test basically says… the contractor has to be in a different business. They can’t be in your business.”
The Harbor Trucking Association, which represents fleets operating in the southern California ports, told HDT it is “actively collecting information on the decision to best guide our members on their options for best industry practices and compliance.” Noting that it remains committed to supporting “trucker choice,” it also said, “It is important to note that both Massachusetts and New Jersey use the ABC test for independent contractors and still utilize owner-operators in their trucking industries.”Save and publish
The Owner-Operator Independent Drivers Association, which you would think would be very concerned about the ability of its members to contract with companies in California, at press time was still reviewing the case and had no official position on it. One wonders, though, how their relationship with the Teamsters union, which has been pushing the “misclassification” issue at the ports in California and elsewhere, might affect OOIDA’s position. OOIDA and the Teamsters have teamed up to fight issues such as cross-border trucking with Mexico and bills that would allow younger truck drivers to operate interstate.
Moseley noted that he would have expected this type of thing to come from the state legislature rather than the court. But the state legislature is working on separate measures, including a proposal to make shippers liable in employee misclassification cases at the trucking companies they use to transport their products.
Are there abuses of the independent contractor model by some trucking companies? No doubt. Especially troubling is the use of truck leasing programs that are all but indentured servitude.
But there are also plenty of carriers that use the IC model responsibly, and owner-operators who make a good living, enjoy their independence, and don’t want to be reclassified as employees. Regulators, legislators, and courts should focus on finding ways to target the abusers, rather than lumping an entire industry under the “bad guy” heading.