Californian Law Attacks Truckers & Supply Chain

For years, we’ve talked about a trucker shortage that has been a problem for the international shipping industry and U.S. supply chains. Now, a law is going into effect in California that exacerbates the problem. California’s Assembly Bill 5, referred to as AB 5 for short or the “gig worker bill” because it was designed to force gig-based companies like Uber and Lyft to make independent contractors or “gig workers” into employees, is set to take a substantial number of truckers off the roads and away from the ports in California.

That’s not something shippers want to hear, as they’ve been dealing with massive supply chain issues for the last couple years, particularly at the country’s busiest ports, Los Angeles and Long Beach, located in Southern California.

The California Trucking Association tried to fight the problematic law all the way to the U.S. Supreme Court, but the country’s highest court has refused to take the case. Katy Grimes writes in a California Globe article, “The decision could force California’s 70,000 independent truck owner-operators to stop driving in the state, which is already suffering from supply-chain backlogs.”

Though the decision is a blow to truckers in California, Grimes argues it was the right decision for the U.S. Supreme Court to let California deal with its own legal mess its lawmakers and even courts, which we’ll talk about later, created. And what a mess have they created that reaches far beyond truckers losing their livelihoods in California.

Essential Independent Truckers Outlawed

Independent truckers are an essential part of the supply chain. A shortage of truckers plays a role in backups and congestion that happens at the ports.

Often, when we think about port congestion, we think about the Ports of Los Angeles and Long Beach. They’re the busiest ports in the country, handling more cargo imports than any other ports in the U.S., and have been the focal point of port congestion news. However, there have been moments during the “supply chain crisis” of the last couple years when other major ports have managed to exceed even the congestion of the San Pedro Bay port complex.

Among those ports is the Port of Oakland, which John Ramos shares in a CBS News article is particularly dependent upon independently owned and operated trucks moving containers of goods:

“There’s 9,000 trucks that serve the [Port of Oakland] on a daily basis, and 90% of them are independent contractors.  So, this is a big, big impact,” said Bill Aboudi, owner of AB Trucking in Oakland.

Aboudi employs his own drivers, but also uses independent contractors to handle overflow business, which he just said became illegal.  Aboudi says he won’t be able to use trucks owned by the drivers anymore.

“It just doesn’t work. You own your own truck, it’s your truck. I can’t take possession of it and start using it,” he said. “In a case like my company, we just eliminate owner/operators and just reduce the workload.”

Ramos goes on in his article to chronicle what this means for a self-employed trucker who invested in himself by buying his own truck and would previously be contracted by AB Trucking (or other drayage companies):

That’s a disaster for Hedayatullah Abrahami, who just bought his own truck a month ago.

He, like other owner/operators, spent tens of thousands of dollars to not be someone’s employee, and feels a sense of pride in owning his own truck.

“Oh, yeah, why not?” said Abrahami. “Yeah. That’s my own truck, working for myself, that’s really good. I’m happy for that.”

Now his truck will be useless unless he wants to become his own trucking company, booking his own loads and dealing with the port bureaucracy. That kind of paperwork was always done for him by AB Trucking.

“They arrange everything,” he said. “They talk to the big companies, to the port and everything. They pick all the loads for us.”

Abrahami’s dream of being a truck driver just got a lot more complicated. 

[Paul Brashier, Vice President of ITS Logistics] predicts many won’t stay in California, which, he said, will only make the supply chain problems worse and the cost of everything in the state even more expensive.

Democrats’ Bad Regulation in California

It’s not surprising to see California regulation make problems worse. California is known for overregulation, which pushes up the cost of living and pushes businesses and people out of the state.

This particular law, AB 5, is a 2019 bill that Grimes shares in her article was “authored by Democrat Assemblywoman Lorena Gonzalez.”

[The gig worker bill] completely redefined independent contractors in California, as well as greatly reducing the number of contractors in the state by creating an “ABC test” that instead made them employees, or put them out of work.

AB 5 was passed by Democrats in the California Legislature and signed into law in 2019 by Gov. Gavin Newsom.

You could add signing this bill to a long list of bad moves by California’s governor, who completely neglected the proper care for the state’s forests that he signed agreement to do and blamed the resulting fires on global warming and then came under heat for not following his own draconian Covid rules he enforced on the people he governs. Thanks to millions spent on ads, campaigns, and support by Democrat leaders like Presidents Obama and Biden, none of whom could say the governor had done or was doing a good job, Governor Newsom managed to survive a recall election in 2021. Now he has presidential aspirations, so he can damage the country faster than just doing it through the state of California.

The Fight in the Courts

Immediately upon the governor signing AB 5, truckers went to work fighting the bill. Initially they struck a victory. Grimes reports:

Truckers sued right away, and in January 2021, they won in state court: The Superior Court of California in Los Angeles ruled that independent truckers were exempted from AB 5. The court found that the law violated the 1994 Federal Aviation Administration Authorization Act​ (FAAAA), effectively giving independent truckers the right to operate in every state to (1) make uniform federal laws possible for easy interstate commerce, and (2) to create fair competition, the Globe reported.

However, the victory was short-lived, as Grimes chronicles:

The California Attorney General promptly appealed the decision, and the 9th U.S. Circuit Court of Appeals ruled 2-1 in April 2021 that truckers would no longer be exempt from the state’s AB 5 worker classification law, forcing many to become employees rather than independent contractors.

Then the California Trucking Association appealed to the Supreme Court. As stated, the Supreme Court decided against taking the case and cleaning up the state of California’s mess, leaving us with a situation that the California Truckers Association described as follows:

In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent 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.

Irony & Power

In his article, Ramos points out the irony that companies like Uber and Lyft were exempted from AB 5 with the passage of Proposition 22. But he adds, “Brashier said he believes AB5 was always intended to force independent truckers into trucking companies, making them easier to unionize.” That would give the Democrats who run California motive for pushing this damaging law, as unions tend to financially support the Democratic Party, whether members who are forced to join and pay dues support the party and its policies or not.