The Grawe Gazette – General Counsel
Supreme Court Rejects Trucking’s Request for AB5 Review
By The Grawe Group, June 2022
It turns out we did not have to wait long. Today the U.S. Supreme Court declined to take the California Trucking Association’s challenge to California’s AB5 independent contractor status test.
The Supreme Court turns AB5 challenge back. What does that mean?
By rejecting the case the Supreme Court is saying the 9th Circuit’s decision stands. This means AB5 is not pre-empted by federal law, and California can begin enforcing it against trucking companies. There may be a few minor administrative steps, but as an industry we can expect CA to be free to enforce AB5 in days or weeks, not months.
Lawyers will meet to evaluate other litigation options, so the fight may not be entirely over, but this is a significant setback. Even if litigation continues carriers need to prepare for CA enforcement in the meantime.
If you have not already, you should be thinking about how this impacts your business.
- Will this impact your business directly? Meaning, do you have CA operations? Do you have CA facilities? Do you have dedicated routes in and out, or just irregular routes?
- Do you need to change your business model substantially, or can you make operational tweaks? What if other states push similar legislation?
What should you do now?
If you do not have a plan already, get your advisors together to consider AB5’s impact on your business today, and the impact if other states follow suit. Include feedback from all the disciplines in your business because the paths you choose will likely impact each area. Evaluate how much of your existing operation and near-term plans are impacted by CA’s freedom to enforce AB5. Do you have no activity in CA, a little, or a lot? Could you make minor changes to the way you use ICs to serve CA and avoid using ICs in CA if you were forced? Will you stick with your current model, use more employee drivers, or create a new IC model? Will you need to make adjustments to your business nationwide, or can you regionalize any changes? Are there technology solutions, or other third-party businesses out there that can help you build a better IC program?
The answers you come up with could impact your recruiting, your freight network, your dispatching, your insurance programs, your customer contracts, and the way you sell yourself to your customers, your permit and plate program, and much more. Make sure you evaluate your business with all these aspects in mind. Listen to the lawyers yes, but do not shut out other considerations as you develop and implement plans.
And if you have not already, engage with your state and national trade associations and your state and federal senators and representatives to educate them about the impact legislation like this has on the drivers we all know enjoy being independent as well as the impact it has on your business.
The Grawe Group, LLC is here to bring peace of mind to you and your business. We are a professional services firm focused on the transportation industry. With a team of experienced executives, we provide general counsel, executive leadership, and special project services for trucking and logistics companies. From legal and risk management matters, to operational, financial, and leadership challenges, the Grawe Group has the practical expertise in trucking and logistics to help you build sustainable success. www.thegrawegroup.com.
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