A seismic change in the California independent operator model has occurred as the Supreme Court of the United States (SCOTUS) has refused certiorari in the California Trucking Association (CTA) vs Bonta case. That means AB5, the controversial law forcing employers to treat independent contractors as hired employees if they serve the same primary function as employees for the company, is now active.
News broke as the Orders From The Court, a list of cases granted, denied, or commented on by the Supreme Court was released. This is the final day of the 2022 term, as the Justices go into recess for their summer break.
A response from trucking veterans and organizations
Dan “The Trucker” Roe, Owner of Roe Transportation, has some comments about a time nearly forgotten before deregulation went into effect in 1980. A well-known name in the refrigerated freight circle, Dan had some comments about the owner-operator situation in general.
“May the years of skirting workman’s comp and years of unpaid taxes come to an end. Time for carriers to pay owner-operators on a two-check system – one for the truck and one for the employee. That was normal when I entered this industry as an owner- operator five decades ago. It worked well for the owner-operator. Then corporate greed took over and the industry moved away from the two-check model. It’s the old divide and conquer tactic. Drivers and owner-operators stayed with companies longer back then; go figure. Nowadays, companies want to pay the least they can, then cry about a driver shortage; go figure.”
“My main point is that there wasn’t a driver shortage issue when I first entered this industry. Then with deregulation, there was an incentive to dumb the industry down. It’s the old ‘give ‘em an inch and they’ll take a mile.’ There’s probably not many of us left that worked under the two-check system. It was a system that made sure taxes were paid and drivers were covered by workman’s comp and unemployment insurance.”
Sadaya Morris, also known as @port_nj on Twitter, is the owner of Pink Transportation and an advocate for truckers. She recently visited the White House and met with Congressional leaders. Here’s what she had to say:
“It [AB 5] will be detrimental; 83% of drivers are owner-operators. One reason they are is because being on a 1099 gives them an advantage when it comes to funds and lets them have some sort of control of their workstyle. I believe the owner-operator model should be protected at all cost because these are small American companies. The last thing we need is to make our workers feel like they no longer have control of the property they own. Now, if they want to come up with a model for some that want to be classified as an employee, employers need to make sure all of them have full benefits and every incentive that comes with that title. I do believe the government should provide a subsidy to them since they will be using their trucks, which they purchased to move loads for a company with no more control.”
The Owner-Operator and Independent Driver Association (OOIDA) has released comments about the court’s refusal to hear the argument. In its publication, LandLine.com, the association responded by telling readers the history of the AB5 campaign – since the initial rule was issued to the CTA appeal to the Supreme Court of the United States (SCOTUS).
“AB5 is so wide ranging that knowing how to comply is impossible for many directly working in trucking. With AB5 now set to go into effect, thousands of owner-operators driving in California face an uncertain future. California has provided no guidance to owner-operators about how they can work as independent contractors under this new scheme, and truckers will be at the mercy of the courts to interpret how the law will be applied. “
“For truckers that have invested their blood, sweat, and treasure to create their own businesses, it is dismaying that lawmakers and the courts are forging ahead with this radical policy that dismisses a beneficial business model that has been in place for decades. At the same time, we know this will not be the last word on the legality of AB5 and expect to participate in future challenges to the law.”
Norita Taylor, APR, Director of Public Relations, OOIDA
Industry experts weighs in
Michael Ritezma, President of Superior Trucking Payroll Service, an expert in payroll processing for trucking companies, owner-operator payments, escrow management, and income tax preparation for owner-operators and other independent contractors, had this to say:
“Whether or not AB5 eventually gets adjusted or not, states are going to come hard after ‘employment misclassification,’ that is people that should be paid via a W2 getting a 1099 instead. Trucking and construction have the most 1099s, so I’d expect them to be the focus. The states will need the cash and raising tax rates in a dubious economy adds a legislator to the unemployment line, so enforcement will be the thing. The IRS is already boosting up staff and increasing audits so going after suspected misclassification seems like the next move. It doesn’t help the matter that many in the government do not understand trucking, so applying the laws to trucking companies can be a challenge.”
Salvatore Mercogliano, professor and Chairman of History, Political Science & Criminal Justice at Campbell University, offered his opinion. He is a maritime historian, merchant mariner, and host of “What’s Going On With Shipping?”
“I am surprised that they did not argue this case as an issue of interstate commerce. Keeping it as a California labor law, it would give the Supreme Court the option to deny cert and bounce it back to the 9th Circuit. The Supreme Court will always avoid hearing a case if they have a way out. They prefer the states and Congress to legislate.”
California Trucking Association responds
Via a LinkedIn posting by Matt Schrap, CEO of the Harbor Trucking Association, the CTA did react to the Supreme Court. Here is the quote:
“Gasoline has been poured on the fire that is our ongoing supply chain crisis.“
“In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation.”
“We are disappointed the Court does not recognize the irrevocable damage eliminating independent truckers will have on interstate commerce and communities across the state. The Legislature and Newsom Administration must immediately take action to avoid worsening the supply chain crisis and inflation.”
California Trucking Association
BTU will have more details as the dust settles on this industry defining decision.
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