California’s New Pro-Union Law Could Grind The Supply Chain To A Halt

• California truckers are protesting against AB 5, a new regulation that would reclassify them as employees rather than independent contractors.
• Truckers say this is “messing with a working model,” and that they’ll “have to take less work and charge more.”
• AB 5 takes effect at a time when supply chain issues are of major concern, and the White House is watching the issue.

California truckers are protesting across the state to express their disapproval of Assembly Bill (AB) 5, a new law backed by unions that reclassifies them as employees rather than independent contractors and could send shockwaves through an already-stressed supply chain.

The regulation was partly enacted to protect gig workers at companies like Uber and Lyft that hire independent contractors in large numbers without affording them the benefits given to employees, but will complicate or render illegal the current employment status of many of California’s approximately 70,000 independent truck owner-operators, The Wall Street Journal reported. The law will likely force some truckers out of the industry, thus lowering shipping capacity and raising prices for transporting cargo in the Golden State at a time when California ports have already experienced major supply-chain bottlenecks during the COVID-19 pandemic, CalMatters reported.

The truckers are vital to the supply chain, and we have to ensure that there are adequate conditions. We’ll continue to watch and assess these impacts,” White House port envoy Stephen Lyons said Wednesday in reference to the law.

AB5 was signed originally by the California Governor. Gavin Newsom in 2019 and had been working its ways through the courts ever since, but the U.S. Supreme Court declined to review the case on June 30, paving the way for the law to go into effect earlier this month, CalMatters reported. Now, truckers may have to get their own permits and insurance which could increase their annual costs by $20,000, the WSJ reported.

“Gasoline has been poured on the fire that is our ongoing supply chain crisis,” the California Trucking Association said in a statement following the Supreme Court’s decision not to hear the case back in late June. (RELATED: ‘A Definite Slowdown’: Business Owners Say They’re Already Seeing Signs Of A Recession)

California’s ports are already some of the country’s least efficient, logistics experts previously told the Daily Caller News Foundation, and fewer drivers in the workforce could imperil the state’s shipping infrastructure further.

The historic congestion at the State’s ports highlighted the need for an improved and more reliable supply-chain infrastructure. To this end, the state has openly expressed the need for an increased workforce, yet the available supply of drivers, ‘owner-operator’ or otherwise, will be drastically reduced given the imminent application of AB 5 to the trucking industry,” several California state lawmakers wrote in a July 5 letter to California Gov. Gavin Newsom. The new law creates uncertainty in supply chains. Ron Leibman is a partner with McCarter English LLP and specializes on freight.

” The truth is that no one knows the final outcome. Leibman explained to the DCNF that truckers from different locations will be affected in different ways.

A number of truckers from the Port of Oakland intend to be home on Monday as they did this week at Los Angeles and Long Beach. According to the WSJ.

Truckers are currently “blocking off main access gates to some of the major ports slowing down regular operations as a show of unity” against AB 5, Miguel Ramirez, who has been an owner operator in Southern California since the early 2000s, told the Daily Caller News Foundation.

Truckers in Los Angeles jammed traffic and initially prepared for a 24-hour protest on Wednesday, but a “massive crowd” of drivers responded with such passion that they plan to continue protesting across the state, one of the demonstration’s planners told Supply Chain Dive.

#Truckers jamming traffic on the 710S in #LosAngeles! @knxnews #AB5 pic.twitter.com/EtwBwGiZSH

— Craig Fiegener (@CraigNews3LV) July 13, 2022

Many drivers that own and operate their own rigs but have arrangements with shipping companies would no longer be able to do so under AB 5, according to the WSJ.

This would disrupt a functioning model and make independent truckers less successful, Ramirez explained to the DCNF. According to Ramirez,

“AB5 would give independent owners only two choices: either become employees and forfeit all liberty and hours under another company’s policies and mandate, or become an employee. The president of an Oakland trucking company with six drivers full time and a fleet that includes eight trucks, stated to the WSJ that AB5 will “kill the liberty of truckers and destroy the American Dream

” I will have less work and be paid more.”

Truckers prefer to be independent contractors and AB5 is going to add to further supply chain woes.

This is why many of us #FightForFreelancers. https://t.co/ncQoGLMvG9

— Gabriella Hoffman (@Gabby_Hoffman) July 14, 2022

The International Brotherhood of Teamsters has maintained that trucking companies have long misclassified drivers as independent contractors to deprive them of fair compensation, the WSJ reported. The legislation would not affect union members because independent owners-operators cannot be employees.

Neither the California Governor. The Daily Caller News Foundation asked for comments from Gavin Newsom and the California Teamsters Public Affairs Council.

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