California democrats have effectively killed off the Independent Contractor business model in trucking. Come January 1, 2020, if you hire a bona-fide owner operator truck driver to haul a load under your authority, the state of California and plaintiff’s lawyers will be allowed to destroy your business, sue you back to the Stone Age, and, as an owner, director, or officer of a trucking company, take everything you own. Yeah, it’s that shitty.
California Democrats decide to take a bad idea and make it worse.
As I’m sure all of you know, in 2018 The California Supreme Court decided on their own to completely change independent contractor law by adopting the “ABC Test” to determine whether someone is an independent contractor. Apparently, they were so enamored with how the state of Massachusetts determines who is an independent contractor, they shit-canned decades of common law jurisprudence culminating in the “Borello” test, and committed some of the worst legislating from the bench in American history when they handed down the decision in Dynamex Operations v. Superior Court (2018) 4 Cal. 5th 903, and made the ABC test the law of the land.
The Democrat politicians in California went into unbridled orgiastic ecstasy and clearly felt that Dynamex wasn’t simply another court case, but something holy like The 10 Commandments God gave to Moses on top of Mount Sinai.
Unlike Moses, who probably had some humility and decided it wouldn’t be a good idea to fuck with God by changing the 10 Commandments, The Democrat politicians were undaunted and obviously believed they could improve on the divine edict as handed down in Dynamex and make it better than their Higher Power originally intended.
The Democrats have (another) orgy.
While the ABC test, as handed down by the Creator and relayed to humankind through His vessel The California Supreme Court, was a good start in the minds of the Democrats, they decided to broaden its reach after getting together and taking a bunch of ecstasy at a rave. Well, to be honest, I’m not sure the Democrats we’re high on ecstasy (or maybe LSD) when they created AB5 and proclaimed it “God’s law”, but until someone can give me a better explanation for their behavior, I am going to continue to float that theory.
Regardless of the status of their neurotransmitters and intoxicated brains, AB5 has been entered into the sacred text of California law in the book of Gavin. And while the Democrat politicians seem to be in a state of perpetual inebriation, owners and officers of trucking companies are headed for a shit storm that can only be described as the buzz-kill of the century. A word of advice to trucking company owners using ICs: don’t drink on New Year’s Eve, because do you really want to be hung over while attempting to come to grips with the fact that AB5 is now the law of the land? And if you plan on celebrating in Vegas, you may want to simply stay there and open a marijuana dispensary.
Let’s add a few more Commandments.
When the ABC test was handed down by God…. er, I mean the California Supreme Court…. it was limited to wage orders which, for practical purposes, limited the application of the test to such things as minimum wage, meal and rest breaks, and keeping accurate wage statements and time records, etc.
Despite the consecrated genius of its original form, the high priests of the Democrat Party expanded the ABC test to apply to the entire labor code and the entire unemployment insurance code. So regardless of what state agency is coming after you or what State sanctioned temple you are being held in to account for your sins, get prepared for some old testament justice meted out by Labor Board commissioners, tax auditors, plaintiff’s attorneys, and whoever else has been given the green-light to cut off your head.
So what do I do to keep myself out of the crucible of the Democrat Overlords?
Well, before I conclude that you’re fucked – which you are – allow me to elaborate on your shitty options which basically fall into two major categories: convert your independent contractors into employees by 1/1/20 (good luck with that); or continue to treat them as independent contractors (good luck with that).
The employee route:
OK, this is simple: convert all of your 1099 owner operators into employees for all purposes. Withhold taxes. Provide benefits. In addition to withholding, and on-boarding them as employees, be sure to comply with all of the requirements of the California labor code. So be sure to track all of the hours they work, pay at least minimum wage, make sure meal and rest breaks are provided, along with sick leave and family leave. Reimburse them for all expenses. Be sure to put up a California compliant poster in the break room. Make sure your wage statements are compliant and your time keeping records are meticulous.
Oh – yeah – one other little detail: get a work comp policy. I’m sure State Fund will be happy to sell you one at 25 to 30% of your payroll.
Then, after you have done all of that, you can bask in the gratitude and appreciation of your former independent contractors, who will be universally sympathetic to your plight and understanding in that you are simply trying to abide by the law.
But wait, isn’t there some exemption we can take advantage of?
Well, you are probably thinking of the “Business to Business” exception. Here, let me quote it verbatim:
1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (‘business service provider’) contracts to provide services to another such business (‘contracting business’), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:
a) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
b) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
c) The contract with the business service provider is in writing.
d) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
e) The business service provider maintains a business location that is separate from the business or work location of the contracting business.
f) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
g) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
h) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
i) The business service provider provides its own tools, vehicles, and equipment to perform the services.
j) The business service provider can negotiate its own rates.
k) Consistent with the nature of the work, the business service provider can set its own hours and location of work.
l) The business service provider is not performing the type of work for which a license from the Contractors State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.
I have this picture in my mind of the California Democrats who created this abomination sitting at the edge of a minefield, drinking lemonade and eating petit fours, while watching trucking company owners try to navigate the minefield that is the “Business to Business Exception”. Of course, they sit back and laugh while watching the trucking company owners and executives get blown to smithereens and smugly deride them for being so stupid as to classify anybody as an independent contractor.
Shades of Gray.
While the picture I paint is sort of black and black, there are about 10 or 11 options trucking companies can consider as they confront this horrible new reality. You may consider it worth your while to sit down with me and discuss these options, however, I will be blunt: they all suck.
So, I prepare to bid farewell to the independent contractor/owner operator truck driver: it’s been nice knowing you. I hope one day you arise from the ashes.
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