Article by Bill Mongelluzzo, Senior Editor | Jan 06, 2020 4:58PM EST for JOC.com
Drayage companies in Southern California are channeling more freight through their brokerage divisions as a hedge against the possibility that state law known as Assembly Bill 5 may ultimately be upheld by the
courts, which would make it increasingly difficult to contract with owner-operator drivers.
Harbor trucking companies in other states with AB5-type legislation pending, such as New Jersey and New York, are inquiring about the freight brokerage model in case the decades-long practice of contracting with owner-operator drivers is threatened. However, they are not as far along in the process as are drayage operators in California, where AB5 was signed into law in September.
AB5 took effect Wednesday, but a judge carved the trucking sector out of the larger case involving ride-sharing firms and other companies that are based on the independent contract model. US District Court Judge Roger T. Benitez granted the trucking sector a temporary restraining order on New Year’s Eve. The next court date is Jan. 13 where the California Trucking Association will seek a preliminary injunction.
Regardless of the outcome of AB5 litigation, trucking companies in California, especially drayage companies that contract with dozens of owner-operator drivers, are looking seriously at the freight broker model as an alternative to what they fear will be a relentless push by California and other states to abolish independent contractor operations. States lose millions of dollars in tax revenues each year because those companies avoid paying workers compensation and other taxes.
