California’s new bill Assembly Bill 5 (AB-5) has been in effect for less than a month and it already has had its fair share of legal challenges. AB-5 went into effect on January 1 in an effort to give independent contractors the same protections as full-time employees. There are several occupational exemptions that include doctors, dentists, lawyers, and real estate agents, as well as some professional services exceptions.
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If you have questions about how AB-5 impacts your business, ask a lawyer.
Recent court rulings
A federal judge ruled in favor of the California Trucking Association (CTA) and granted their request for a temporary injunction to stop AB-5 from being enforced against truck drivers. This ruling follows an emergency restraining order filed by the CTA to stop the law from affecting truck drivers hours before it took effect on January 1, which was granted. Until the lawsuit is completely litigated, AB-5 cannot be applied to truck drivers.
However, not all truckers support this injunction. It seems that there are two camps: Those who believe AB-5 will protect them from exploitation by larger shipping companies and those who want to remain independent contractors after their monetary investments in their trucks.
The CTA’s strongest argument against AB-5 is that it is a violation of the Constitution’s supremacy clause. The Federal Aviation Administration Authorization Act of 1994 is the existing federal law regulating the trucking industry that the CTA argues supersedes AB-5. The supremacy clause provides that federal laws supersede conflicting state laws.
Solutions/Workarounds for CA Assembly Bill 5
While truck drivers may have a temporary reprieve from AB-5, other gig economy companies are ready to challenge the law in their own way. One rideshare company has overhauled nearly all of its California policies affecting riders and drivers alike. California riders will now see a price range instead of a guaranteed price when requesting a trip. One of the new changes for drivers is that they can view all the details of a trip before accepting, and it gives them more freedom to reject rides without being penalized. The implemented changes are to give drivers more freedom and strengthen the rideshare company’s claim that they are not employees.
For a law that is only a month old, AB-5 already has a number of legal challenges to overcome. Several large companies that are dependent on the gig economy are part of a joint lawsuit accusing AB-5 of being unconstitutional. It will take some time before the fate of AB-5 is decided in the courtroom, but even then it may still end up on the ballot in November.
If you have questions about how AB-5 impacts you as an employer or freelancer, ask a lawyer.