Despite the overwhelming success of Proposition 22, California business owners still have to worry about AB5 and the parts of it that were left in place. As a result, they need to spend time thinking about compliance and developing a strategy. A recent court case made it even more apparent that some aspects of the law may be here to stay. However, gig-based companies are still lobbying and fighting hard against the law.

AB5 Has Been the Law for Over a Year

AB5 was passed by the California Legislature, and it became law on January 1, 2020. The law prohibited certain gig-based companies like Uber, Lyft, and Doordash from classifying workers as independent contractors. The law required that they are treated as employees for purposes of benefits and job protections. Parts of AB5 were overturned by a referendum in the November 2020 election, and it does not apply to Uber and Lyft drivers anymore.

AB5 Will Apply to the Trucking Industry

However, AB5 does apply to other industries. The most recent development was a lawsuit filed by the trucking industry trying to establish that AB5 would not apply to them. The result was not what the trucking industry had hoped for, as a federal court ruled that the trucking industry must follow AB5.

Originally, there was a preliminary injunction in place that was preventing California from enforcing AB5. The Court of Appeals lifted that injunction. The trucking industry had been arguing that federal trucking laws preempted AB5. Their position was this was a law that was attempting to regulate routes, rates, and prices. These are topics that only the federal government can regulate. However, the federal court held that AB5 did not relate to any of these topics and would not be preempted. 

What this means is that AB5 will apply to the trucking industry. The owner-operator model that is the basis for California’s trucking industry could be in trouble, threatening how goods move around the state. Businesses should be prepared to learn more about how to comply with this law now that the injunction is lifted. For now, AB5 only does not apply to app-based gig services. It governs the rest of the gig industry where workers are classified as independent contractors. 

Uber and Lyft Continue to Fight Independent Contractor Restrictions

In the meantime, Uber and Lyft continue to lead the charge to oppose AB5. After spending over $200 million to pass Proposition 22, the companies realize that this is a direct threat to their business model. With some in Congress talking about a national version of AB5, companies will be increasing their spending to fight these efforts. For businesses, it ties their hands as they seek to find the labor that they need to grow. 

Call Today to speak with a Mountain View Small Business Lawyer

As controversial as the law is, California companies must learn how to comply with AB5 to stay out of trouble. Contact Kalia Law online or call us at (650) 701-7617 to learn more about how this law could affect your business.

- Claire Kalia

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