AB5. Will it be enforced? What do you think?

So what is the rationalization for the exemption of real estate agents? They operate under the license of the broker and under under exclusive contract to that broker. They have no more control - and having done both - I'd say less than a driver operating under a carrier's authority.

 

"The law is not up for individual interpretation?"

I dunno about that, the SCOTUS is constantly hearing cases being disputed on many levels.

Seems to me that the more the government regulates, it only serves to hurt the independent working man just trying to make a meager, but honest, living. There's coming a time when the O/O will be effectively eliminated due to government regulations and overreach.

BTW, aren't you the one paying like $32k a year for insurance?

 

Back in the 80’s and 90’s trip leasing was popular but now would be big time frowned upon as double brokering.

I think the reason why owner ops are leased onto an authority is to satisfy insurance requirements. That alone seems to be the motivator of how it’s done now. Assuring the customer or broker that the company they hired and company who’s insurance they checked, is in fact the insurance of the truck actually hauling it.

 

I hope you and all drivers to understand the B part of the ABC test in the AB5 and the PRO. You cannot be an IC under AB5 and PRO. You can only be an IC for a carrier if you are providing service that is "outside the usual course of the company's business", for example cleaning services. The moment you engage in trucking, you are an employee of a carrier under the AB5 and PRO.

There are few things I also want to touch on after reading your replies.

1) Lease on contract - most contracts out there are exclusive lease on contract. The exclusive lease is on the equipment. It doesn't limit the driver to work for someone else. If the contract limits a driver to work for the carrier exclusively, the driver is classify as an employee. The tension begins here. Driver wants to work for you whenever he/she feels like it or you have a load that pay well and easily done. Carriers must get load delivered to satisfy the customer and dispatch and safety are the one who get the pressure internally thus push it on the driver to get the work done. There are many brokers in the market, but how many brokers a REAL broker and is able to supply you great volume of work? Be real.

2) Lease to own program - depends on the carrier you are signing up with, does not necessarily a rip off. This program is by choice, not by force. Carriers don't just purchase a truck for the program, they purchase for their own operation. What is the total cost to put a new truck on the road that fit the operation? Day cab or Sleeper? Bendix or pure? Any permit requirements? Influence on insurance? Influence on accident lawsuit? A carrier don't just buy a truck and roll because terminating a contract and move to another company is never an option for a carrier. Selling them to drivers is an addition to the operation for more competitive market rate by sharing expenses with the driver; to increase retention rate and to stabilize capacity.

Carrier is not a dealership and doesn't buy a truck for resell. The driver made that choice to participate into the program. And it is really the participant responsibility to read the contract and evaluate the carrier operation before signing up. If the lease to own program is not for you, and you want to be independent, go get a truck from a dealer and get your own financial. Carriers are not financial institute, carriers don't sell loans, it is a huge difference on return (both cost and profit). Of course a carrier will push you to work to pay off that loan. The carrier purchased a truck for profit and you are holding up the return of the truck for leasing it and have the truck sit. The truck depreciate by year as well. And if you fail on the program, the carrier stuck with a depreciated truck. Some carriers may do another lease to own on the same truck when the previous driver failed on the program. But to me, it depends on the year and mileage of the truck. If it depreciate "too much," I would sell it instead. Screwing a driver only come a short profit, but it can hurt the fleet down the road, especially with all those rumoring and possible lawsuit. I am sure many carriers have already learned that lesson badly.

3) Lease on O/OP vs IC - this is all about cost, volume and administration. AB5 comes from CA, so before anyone talks about the AB5, I encourage you to try to setup your operation in CA to get a taste first. Remember, many Americans can't pull out $400 extra for the month, and now you try to pull a few thousand dollars to get yourself going? See, lease on O/OP has the office to take care all of that. You don't need to deal with chassis billing, detention/demurrage, SCAC, UCR, port registration/fee, insurance, dispute and negotiation with customers/consignee/SSL/brokers, lawsuit, account receivable and many more. If you are up to take care all of that in one plate as a true independent contractor, sure, be an IC. The reality of what I see, however, is that a family member will take care of all that for FREE.

With one truck, you aim for high profit, but how high can you get? You are not the only IC in the market bidding the rate down. And now with all the hotshot with F250s hauling all sizes of boxes running around? Good luck with that. To make more money, you need to scale, so you become another MC. There are many IC thinks they are IC because they have the number. In reality, they are the same. Lease on o/op have the freedom to take the truck away just like an IC. Carriers may put a year or two years limitation of when you can come back. This is to discourage many from hopping around as it endanger the capacity and also for show to the insurance as they love micro-monitoring and managing MC.

The AB5 and the PRO to me is all about money - people wants to make more (who doesn't want to?). But before we even talk about driver pay, lets think about how much you are willing to spend. MC makes money by the volume, get order by competitive rate, not by a profit rate of a single load. Trucking remains "cheap" when everyone is taking a cut of a single load. Those MCs that owned by SSL get high volume, high profit, because they get loads from the source. With the use of EDI, you have no idea how many work orders they are processing in a minute. When more MCs are doing this, rates will be more competitive at the Freight Forwarder level.

Chain after chain, group after group, what an individual can do? We are a group, but we are an individual. What makes us different?

 

Not paying $32k, it’s $23k a year for insurance for me. But my situation is different than others with their own authority. My premium is high due to garaging determination by Progressive and also because of length of time driving.

 

Exactly my point. It’s not enough to purchase a truck/trailer and lease it unto a carrier to be deemed an independent contractor according to FMCSA nor the IRS. But carrier’s have found a loop hole to get around this definition and that’s what AB5 puts a stop to if enforced.

A motor carrier that operates under it’s own authority but contracts with another carrier to pull loads is not the same as a driver who leases a truck/trailer but has no operating authority. The later would be an independent contractor since they are legally allowed to operate as a motor carrier. Thus the FMCSA classifying said carrier as “Authorized For-Hire.”

A lease operator has no authority to operate and therefore is not authorized for-hire. This in turn makes the lease operator under complete control of the carrier he/she is leased to.

My point is that if lease operators are classified as independent contractors, then lease operators should have to follow the same regulations that a carrier authorized for-hire has to follow. Since no carrier exists that would admit that a lease operator is an employee, they are essentially saying that a lease operator is it’s own carrier hired to perform a service. This is using a loop hole that needs to be closed according to law.

 

Are you frustrated to get O/OP to do what they are suppose to do? Because many O/OP will get compliance review and get shut down sooner than they think if they are a MC.

Although AB5 is set up for the general public, but this is one of the effect it will bring to the trucking industry if we don't get an exemption.

 

All THREE have to be met, not just one.

AND because the relationship between the owner operator and the customer who is the shipper/broker, or in a leased owner situation, there is a on going negotiation involved for each piece of work.

OK here it is.

From another thread - Their interpretation is wrong. They are leaving out a lot, I read a dozen articles which seem to be all the same.

I just went through this with California ab5 because I had contractors from California. They are now all employees with the same latitudes given to them as they had as contractors.

Here is what I have learned, I will pass it onto you guys and you can ask your lawyers about it, so don’t take this as legal advice but just pointing you guys in the right direction.

As an independent owner, not one affiliated with a fleet but single truck, the law has stated that you are not covered by ab5 if you are an employee.

The leasing to a carrier can be done only as a company entity, much like what fedex did back in 2010 forcing a large number independent contractors to form a Corp to cover FedEx butt.

This shifts the burden now on those companies, not the carrier being leased to.

In order for you as an independent owner and as a driver to operate based in California you now have to be an employee of your company.

That’s it.

Ab5 is about the relationship between an independent contractor and a company, not about the relationship of a company and a carrier. It was created to address allege abuse that the courts said were created by the misuse of the 1099 form of employment. My opinion and those of many lawyers, it was improperly done but nevertheless created and impacts only a small amount of people in California.

Two other things to add, leasing and authority.

Both are covered under ab5 only if the leasee is not an employee. Ab5 as it amended California labor code was clear it wasn’t to impact leases of contracting services, or other services if there are employees doing the work again assuming that the lease is between a company and either a company or an individual. It gets complicated because the fact that California loves to create all the exemptions for special people and it is full of them - trucking isn’t specific, but construction transportation is.

Authorities are treated the same way. You as an independent owner who has their own authority has to have that authority owned by a company and you are an employee of that company.

Again this is being posted to guide you all in the right direction. I had to deal with this first hand to ensure those who drive for me are taken care of.

I am going to add two things.

First is this is in flux, it is a BS law and no one knows where it will land. The second is those who have "written" about it, have used the same source of information, even many of these lawyer's practices who have "blogs" seem to use the same boilerplate info. I know this business first hand and many don't seem to get how much wrong information is out there. With that said ... one thing that has come out of this is fund raising - I know two places (won't mention them) have undertaken the need to raise fund to "FIGHT" and asked money for that fight. NO one should give to crap like this.

 

What FMCSA regulations are not being followed being leased to a carrier? And if there’s all this money on the table by leasing trucks on then it seems that you’d want trucks on your authority so you can make that $300 a week from them.

And since you want to say I’m an employee then I’d like your take on my exact situation. I own my truck and trailer. I give my friend 2% to use his authority. I am not dispatched by him and he could care less what I do with my truck as long as I pay him. I’m dedicated to another carrier full time through their brokerage to take advantage of their direct freight. So I’m hauling for a broker, the same as you. The only difference is I’m paying 2% for authority and $590 a month insurance for my truck and trailer. Are you going to try and say I’m an employee of the carrier I’m “leased” to because I use his authority? Even though I only talk to him once a week and he’s never dispatched me on a load?

You’re saying that I’m an employee of the carrier that my equipment is leased to even though I dictate when I work. So by that logic, a plumber that gets called in to work on a new house must be an employee of the general contractor because the plumber is working at the direction of the general contractor.

My hats off to you for getting your own authority, the money isn’t there for me to reactivate my family’s authority even though I’d like to get that old 5 digit DOT number back on a truck someday. But it seems you feel that by throwing a wrench in how this industry has operated for years will somehow benefit you with a level playing field. It won’t. Everything will keep moving just like it does. People will find work arounds. The megas will still be megas. The little guys will still struggle.