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 so critical to this supply chain and we’ve got to make sure there are conditions that will take care of them. We’ll continue to watch and assess these impacts,” White House port envoy Stephen Lyons said Wednesday in reference to the law.

AB 5 was originally signed by California Gov. 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 ongoing congestion felt at our State’s ports exposed the dire need for a stronger 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.

At the very least, the new law adds uncertainty to supply chains, Ron Leibman, a partner at law firm McCarter & English LLP who specializes in the freight industry, told the DCNF.

“The truth is no-one knows what the ultimate outcome of this will be. And truckers in different places will be affected differently,” Leibman told the DCNF.

A number of truckers at the Port of Oakland plan to stay home from work on Monday, as others have this week at the Ports of Los Angeles and the Port of 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 mess with a working model and leave independent truckers worse off, Ramirez told the DCNF.

“AB 5 would leave independent owner operators just two options: become an employee and lose all your liberty under someone else’s mandate, hours, and follow their policies, or jump ship and become your own company, but have to do all sorts of things that most truckers don’t want to do like regulatory stuff in an over-regulated and complex industry,” according to Ramirez. “It’ll kill the liberty of being a trucker and kill the American Dream.”

“I will have to take less work and charge more,” the president of an Oakland-based trucking firm with about six full-time drivers and a fleet of about eight trucks told the WSJ.

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. However, independent owner-operators are not employees and therefore cannot be members of the union, so no union members would be affected by the legislation.

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