LONG BEACH, Calif.—Michael Clifford works for a trucking company in Utah but spends much of his time making deliveries in California.
As a nonresident company employee, Clifford said he isn’t happy with California’s new labor law—Assembly Bill 5 (AB 5)—that was approved and signed into law in 2019 and took effect last month after a failed legal challenge.
The new law requires independent truck owner-operators—some 70,000 strong throughout the Golden State—to be classified as employees, with few exemptions.
“The owner-operators run on a tight profit margin. Everybody thinks they make a lot of money, but they don’t,” Clifford said, while standing in line at a transportation logistics company near the Port of Long Beach on July 26.
The way the new law is written, he said, AB 5 likely will do more harm than good to the state’s trucking industry.
For starters, it will create “all kinds of problems in the supply chain, the food supply chain,” amidst a nationwide shortage of truck drivers, Clifford told The Epoch Times.
“What we do here will affect the food supply in another country. It’s very connected,” he said.
On June 30, the Supreme Court declined to hear a challenge on whether AB 5 violates the Federal Aviation Administration Authorization Act of 1994 regarding truck owner-operators.
The court’s refusal to review the case removed a legal hurdle allowing the law to move forward in California, sparking protests across the state. The California Trucking Association likened the situation to pouring gasoline on a fire.
“In addition to the direct impact on California’s 70,000 owner-operators—who have seven days to cease long-standing 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,” the association said.
Jason Rabinowitz, president of Teamsters Joint Council 7 in Northern California, told CBS that the new labor law is about unionizing independent truckers and correcting worker “misclassification.”
Law Sparks Protests
Owner-operators protesting AB 5 at the Port of Oakland managed to shut down operations for a week in July, prompting the city to file a suit against the truckers.In a July 21 letter regarding the protest, the port’s Executive Director Danny Wan said his office would continue working to address the concerns of the truckers to end the blockade.
“I understand the frustration over AB 5,” Wan said. “We hear you. We have heard you since day one of your protest action.
“We support your first amendment right for a peaceful demonstration. However, as we discussed, even before your demonstration began, the supply chain locally to globally was already congested.
“We do not want to see the loss of business and jobs here.”
Truckers Sound Off
“More taxes, more revenues for the state, huh?” Jose Guzman, a company truck driver, told The Epoch Times while waiting to receive his papers at Three Rivers Trucking in Long Beach, California, on July 26.“I have a couple of family members who are owner-operators,” he said. “I know they work here out of port. It seems crazy.”
Another truck driver who wished to remain anonymous said the labor law would devastate California truck owner-operators.
“Every individual who has just purchased, or is paying off their truck, pretty much can’t work anymore,” he told The Epoch Times.
“As an owner-operator, you’re kind of on your own. If it continues, what I’m thinking is people are going to start leaving California.
“You know what’s hard about that? They’re affecting an industry that’s for the state—for everyone. The thing is ... I don’t think anyone is financially ready to stop working to set the [new] standards.”
Another company truck driver waiting for an oil change in Long Beach feared a surge in price inflation if the law were to remain in effect.
“It’s going to increase everything if they shut the truckers down,” the trucker told The Epoch Times on condition of anonymity. “Prices are going to go through the roof, and it’s wrong. It’s totally wrong. It’s stupid for them to do that. This is America—c’mon, people. Common sense.
“Who do you help by doing this? What’s the purpose? We need goods moved around. There’s no way around it. If you create a law, make it for the people, not against the people. Why would you try to destroy families?”
According to California’s Employment Development Department (EDD), an “ABC” employment status test, which went into effect in January 2020, defines if a worker is an employee or an independent contractor in California.
“A worker is considered an employee and not an independent contractor unless the hiring entity meets all three conditions of the ABC test,” according to the EDD website.
These conditions include that a worker proves he or she works independently, performs the work outside the hiring company’s regular business, and routinely works in an independently established trade.
At the Long Beach Travel Center truck stop, Efraim Lara, owner of Lara’s Transportation in Carson, California, said he isn’t happy about the prospect of losing his business and the freedom to set his schedule.
“I don’t feel good because it’s going to be hard for us. I’m the boss. I don’t want to [go] back to [reporting] to a boss. I don’t want that,” Lara told The Epoch Times.
Francisco Gonzalez, owner of F.J. Trucking Services in Palmdale, California, said what concerns him is the potential loss of flexibility as an independent owner-operator.
“I’m not going to have the same freedom,” he told The Epoch Times.
“They’re trying to make us get rid of our trucks at a certain point—as they did before when they changed for the air quality. I had to give up my good truck and get a new truck—this one I paid off last month for $95,000. ”
Gonzalez said he logs between 1,000 and 3,000 miles on his 2015 semi each week based on the job. An owner-operator can earn anywhere from $120,000 to $150,000 annually, “depending on how hard you work,” he said.
His Own Boss
Under AB 5, Gonzalez said he could lose all that.“We just got to keep fighting,” he said. “We have the right to be independent. I will have to sell the truck, and [a company] will have to hire me. I won’t be making the same money [that I am making] as an independent. When the big companies hire you back, they’re going to pay you less.”
Titus Jones, owner of D&W Trucking in Inglewood, California, took the opposing view, saying he supports AB 5 given the amount of cheating that goes on among truckers operating under the legal “umbrella” of owner-operators.
“It’s a serious problem because when you see legitimate companies—family businesses that have been in business for years—you have trucks sitting on the side,” Jones told The Epoch Times.
“The American dream is generating your income. When you purchase a truck, you’re going after the American dream. When you’re chasing the American dream, and you’ve got a lot of cheaters interfering with that, then you feel this isn’t right. How is this working?”
Company trucker Alex Velasco said that while the new labor law doesn’t affect him, he thinks it will “cause more harm to owner-operators.”
Unfair Advantage
Ron Caetano, a consultant for the Owner Operators Co-Op in California, said that “on the surface” AB 5 has shown that companies have tried to pay their employees 1099 self-employment wages to avoid paying normal wages and benefits.“That’s unfair,” he told The Epoch Times. “The law says if I have an employee, I have to pay them W-2. The employers have been skating the law and brought [AB 5] upon themselves.”
However, Caetano said, the price inflation that many fear will result from fewer independent truckers on the road to transport products hasn’t shown up in the spot markets yet.
He said there also hasn’t been a resulting increase in shipping rates since the law went into effect either.
Caetano said this has more to do with the lessening of port congestion, as cargo ships redirect to ports along the Gulf of Mexico and East Coast, taking away business from California.
“There’s no work for the trucks on the spot market. It’s just not there,” Caetano said. “None of that freight has hit the spot market in California. We’re not seeing the inflation of what they’re predicting. Rates are still down—way down.”
However, all that could change if a mirror law known as the Protecting the Right to Organize (PRO) Act passes at the federal level.
The PRO Act would restore the right of workers to “freely and fairly form a union and bargain together for changes in the workplace,” according to the AFL-CIO.
Caetano said the PRO Act includes a similar ABC test provision that could reclassify thousands of owner-operators in the United States.
“Now you’re talking hundreds of thousands of trucks instead of [tens of thousands of trucks] in the state of California,” he said.
The legislation passed the U.S. House in March 2021 and is currently pending in the Senate.
“Technically, 1099 is cash under the table—even though they’re reporting it,” Caetano said. “You’ve got to be able to look at it from both sides. You’ve got to be fair to the honest employers.”
Though AB 5 “levels the playing field for all carriers,” Caetano said, “you’re still going to have some who are going to try to cheat the system.”
“I’ve seen a massive change in the industry—for the worse. There are carriers out here just ripping off owner-operators [under cover of 1099]. What we did was decide [to] start a co-op. Technically, we’re just a bunch of owner-operators in one big organization,” he said.
The trucker’s cooperative helps members pass the ABC test to continue working as owner-operators, Caetano said.
“All they’ve got to do is give us a call, and we get them running,” he said.
Clifford said AB 5 is a “huge deal” and isn’t good for free enterprise.
“I wish we could take the time to talk about what is true capitalism, because it’s not what’s [happening] in this country at this time,” Clifford said.
