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Owner-Operators who drive as subcontractors for trucking companies in the state of California have recently been dealt a blow to their ability to get contracts for hire. A ruling by the California Supreme Court in the Dynamex Operations West Inc. v. The Superior Court of Los Angeles County has laid out a test for certifying the employment status of owner-operators who perform sub-contract work for companies. In the trucking industry, this test, referred to as the “ABC test,” is to be used to determine the classification for hours and wages paid by the company to the owner-operator. If the company cannot certify the tenants of the test, all three of them, to be true, then the independent owner-operator must be classified as an employee and thusly compensated. The reason trucking companies hire independent drivers is to save money, so they do not want to be forced to classify them as employees. 

Tenants of the 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.
  • C -  That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Why Trucking Companies and Operators Should Be Concerned

This may seem easy to prove at first blush, but due to the wording, particularly of the “B” tenant, the concern is that there is no way to clearly satisfy the test, thus relegating all trucking companies to either treat sub-contractors as employees or, more likely, to not use them at all. Any trucking owner-operator is clearly in the trucking business, and so could not be certified to be “outside” of the business of the trucking company that would attempt to hire them. Companies who hire sub-contractors as such, without adequately certifying their independent status as opposed to being employees, should be concerned about being subject to lawsuits by owner-operators that they contract with who will ask to receive compensation as employees. This is no inducement to contract with them to begin with, so ultimately, this law will not work in favor of independent owner-operators, who simply won’t be offered company contracts.   

The Western States Trucking Association sees this restriction as an unnecessary hindrance for trucking companies as well as owner-operators and has filed suit challenging the ruling in the US Court for the Eastern District of California. Their goal is to see a federal injunction against the state of California using this ABC test to certify employment classification for the trucking industry. 

If you have any questions about how this works, contact our office.

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