More than 70,000 trucking owner-operators must make a decision about the consequences of California Assembly Bill 5. Better known as AB5, the now-in-effect California law forces anyone working the same occupation as his/her contract employer to become a W-2 taxed employee.
Gone are the days of being a 1099 contractor, and paying taxes on a yearly basis. Under AB5’s dominion, all must be taxed at the time their paychecks are issued, either weekly or otherwise. The California state treasury has a windfall coming.
What can the CTA do? Enter the Commerce Clause!
The California Trucking Association (CTA) and Owner-Operator Independent Driver Association (OOIDA) have not given up the fight against AB5. After suffering a loss when the U.S. Supreme Court (SCOTUS) refused to grant certiorari to the previous case, they have another option to play.
The Commerce Clause, also known as Article 1, Section 8, Clause 3 of the U.S. Constitution, protects the right to engage in interstate commerce free of undue burdens and discrimination by state governments. The CTA and OOIDA believe that AB5 violates the Constitution due to the difficulties now in place.
The organizations are also lobbying state legislators to reverse course on AB5 and remove or restrict its use on truckers. California has already carved out exemptions for the industries listed here by YMS, LLP. Surely one of the most vital industries deserves a cutout, right?
Okay, so what can I do?
My best advice to drivers out there: “if you have any questions, call a lawyer.” Yeah, it is serious enough to warrant the money for a legal opinion. To quote AB5 itself: “Under Labor Code section 226.8, which prohibits the willful misclassification of individuals as independent contractors, there are civil penalties of between $5,000 and $25,000 per violation.”
With the trucking environment and the economy as they are now, no one has extra money to give the government. So I guess AB5 will just have to take it from us.