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The Impact of the AB5 State Law on Freight Companies

The California Assembly Bill 5, also known as the AB5, passed in September and is making waves across many industries, including transportation and freight. The AB5 bill limits independent contractors in the state of California, including owner-operator truck drivers and freight companies. It may be a wise decision to take a look at your vendor list and decide who you should work with. Although it may not seem like too large of an issue as a vendor, hiring independent contractors or companies that use independent contractors in 2020 may become a larger issue.

In order to be marked as an independent contractor, the worker MUST follow these three rules known as the ABC Test:

(a) the worker is free from control and direction in the performance of services; and
(b) the worker is performing work outside the usual course of the business of the hiring company; and
(c) the worker is customarily engaged in an independently established trade, occupation, or business.

This law has quite a large effect on many companies who classify their drivers not as employees but as independent contractors, like Lyft and Uber, as well as a large effect on the hiring entity, such as yourself. You should expect to see price increases from many vendors who use independent contractors as their main workforce. In order to still manage their workforce the same as they normally would, they’ll have to increase rates to pay their “new” employees correctly.

However, many of these independent contractors may choose to step away from companies and look for ways to maintain their freelancer status, including leaving California. Unlike many other positions, truckers may benefit more as independent contractors than they would as an employee of a larger company. However, these independent contractors that you may have considered hiring before may not be able to pass the ABC test and you may find yourself in a complicated legal situation as their potential employer and financially responsible for more than just their paycheck. Prepare yourself for next year by investigating your vendor list and reading up on the AB5 law as time goes on to make sure you don’t overpay for services and that you are compliant with the law.

The good news is, Best Yet Express customers will not be impacted because all of our staff, including our truck drivers, are employees. You’ll never have to worry about AB5 compliance or added costs due to legal issues surrounding it. We will continue to take care of our customers’ needs without any negative impact from this law passing.

Click here to learn more about Best Yet Express, our services and what sets us apart from other freight companies.