California Truckers: Employees Or Independent Contractors?
By Robert S. Nelson, Esq., Nelson Law Group
Whether truckers should be considered “employees” entitled to various wage benefits, including overtime and meal and rest breaks, has always been one of the more challenging issues in California employment law. But with courts increasingly ruling that a controversial state law making it harder for workers to be treated as independent contractors should also apply to truckers, the question of how to properly classify truckers has taken on new urgency. Truckers mistakenly classified as independent contractors rather than employees may be entitled to significant amounts of wage benefits they otherwise should have received had they always been treated as employees, including minimum wages, overtime and reimbursement of business-related expenses, including gas.
- Background
It is a common misperception that it is up to employers to determine which workers are treated as independent contractors versus employees. Not so. In fact, there are detailed rules, derived from both statutes and case law, dictating specifically which workers can be treated as contractors instead of employees. Workers who are initially treated as contractors can later challenge whether they should have in fact been employees. The distinction is critical, as being an employee entitles workers to various mandatory wage benefits (e.g., overtime, breaks, expense reimbursement, etc.).
For many years, the standard test for differentiating employees from contractors was found in the seminal California case S.G. Borello & Sons v. Department of Industrial Relations. Borello set out almost a dozen factors that courts should evaluate to determine whether workers should be employees, the most important of which was how much control employers had over the workers’ day-to-day work.
- Dynamex, AB 5 and the “ABC” Test
In 2018, the California Supreme Court crafted a new, streamlined employee/contractor test in the case of Dynamex Operations West, Inc. v. Superior Court. Dynamex refined the numerous factors previously used to differentiate employees from contractors down to only three, dubbed the “ABC” test. They are:
- Whether workers can conduct their day-to-day work without direct control by the employers;
- Whether workers perform work that is outside the usual course of the employers’ business (emphasis added); and
- Whether workers are customarily engaged in an independently-established business of the same nature as the work they are performing for the employers.
In 2020, the Dynamex ABC test was formally incorporated into to the California Labor Code via Assembly Bill (“AB”) 5.
- AB 5 currently applies to truckers in California
For the trucking industry, the “B” prong of Dynamex, whether work performed is outside the normal scope of an employer’s business, is particularly challenging. By definition, truckers perform the core output of most trucking companies (i.e., trucking). Various trucking industry associations therefore challenged both Dynamex and AB 5 on grounds that they conflicted with federal transportation law. Although the trucking associations initially obtained an injunction preventing AB 5 from going into effect, it was overturned by the 9th Circuit in 2021. The U.S. Supreme Court then refused to hear further appeal of the injunction in June 2022, thereby allowing AB 5 to apply to the trucking industry.
The Supreme Court’s ruling only affected the injunction against AB 5, not the underlying case challenging the validity of the law itself. But while that case continues, AB 5 remains the law of the land.
- Unique issues with truckers and AB 5
While AB 5 has challenged many industries in California, it is uniquely confounding for truckers, for various reasons:
- Whether the ABC test applies to truckers depends on claims, timing
The Dynamex ABC test applied only to claims brought under the California “Wage Orders”, which establish some (minimum wages, overtime) but not all (expense reimbursement) of the wage benefits employees are entitled to. In contrast, AB 5 applies to all wage claims. This can cause confusion for wage claims arising before 2020, when AB 5 went into effect. In those circumstances, truckers may have to adjudicate some of their claims under the Dynamex/AB 5 ABC test but others under the prior, more difficult Borello test.
- Even truckers who should have been employees may not be entitled to certain wage benefits
Depending on various factors, including the size of the trucks they drive, the loads they transport, and whether and how the loads cross state lines, even truckers who should be employees under AB 5 may still qualify for the “motor carrier” exemption which could preclude them from overtime under state and/or federal law. Likewise, in 2018 the Federal Motor Carrier Safety Administration issued a determination that California’s meal and rest break rules do not apply to truckers who are subject to federal transportation laws governing breaks.
- Entitlement to expense reimbursement can depend on the wording of service agreements
Truckers who were mistakenly treated as contractors can potentially recover business-related expenses they were required to bear, including pay for helpers, upkeep and repairs to trucks, tolls and fuel. Whether employee truckers can recover fuel costs depends on whether their respective service agreements include provisions for fuel payments and, even if so, whether those payments fully cover the costs of the fuel.
The employment status of truckers in California is a complicated question that can have significant stakes for truckers and employers alike. Please contact the Nelson Law Group if you have any questions about this evolving area of the law.