By Craig W. Anderson

Assembly Bill 5 was signed into law Sept. 18 by Gov. Gavin Newsom with little fanfare, but the legislation is certain to engender confusion, anger and uncertainty in various agricultural business sectors.

“Much is unknown about the effects of AB5,” said San Joaquin Farm Bureau Executive Director Bruce Blodgett. “There are many unintended consequences associated with it and it is creating liability for a multitude of California businesses, including agricultural operations.”

AB 5 eliminates independent contractors in a multitude of work environments, transforming them on Jan. 1 into employees, which is, at the very least, confusing and annoying according to Blodgett.

“Most independent contractors want to remain independent contractors and owner-operators,” he said. Farm Bureau, along with other business sectors, are trying to determine the effects of AB 5 between now and Jan. 1, but it’s difficult when hundreds of thousands of workers are involved.

Truckers are being advised to maintain their current business model until challenges to the law get their day in court.

The legislation’s author, Assembly Member Lorena Gonzalez, said she anticipated the legislature would be working on this issue [AB 5] “… for a few years” to refine it.

“Rushing to enact flawed legislation now [AB 5] will put jobs at stake in the interim,” said an analysis by the Littler Workplace Policy Institute think tank.

Test fails

AB 5 is derived from a California Supreme Court 2018 decision that mandated a three-part test – the “ABC test” – on businesses that would define their use of independent contractors. The ABC test determines that if the worker meets these criteria they are an independent contractor: [A] Free from the employer’s control and direction in the performance of the work; [B] Doing work outside the employers usual line of business; and [C] the worker is ordinarily engaged [as an independent contractor] for others in addition to the employer.

In the agricultural business world, farmers and the people working for them as independent contractors or owner/operators of farm service vehicles (such as trucks hauling crops during harvest) may have to change from contractor to employee.

Little explains

Bryan Little, chief operating officer of California Farm Bureau Federation affiliate Farm Employers Labor Service (FELS) and CFBF employment policy director, said “all three parts of the ABC test must be met.”

AB 5’s greatest impact would probably be felt among businesses that move crops to processors, packers and the market such as independent trucker owner-operators.

“We’re very concerned about this aspect and we’re working with the CTA [California Trucking Association] to get exemptions [from AB 5] for owner-operators,” Little said.

He said “our analysis of AB 5 indicates it doesn’t impact the common agricultural practice of farmers hiring farm labor contractors to do short-term work on farms like cultivation, harvesting and other vital activities.”

Little added, “Most labor contractors have already set up the means to operate under AB 5. And there is discussion of a cleanup bill in the 2020 legislative session. We’ll be looking for other opportunities to solve problems associated with AB 5.”

Far-reaching consequences

“AB 5’s consequences are far reaching for agriculture,” said SJFB President David Strecker. “AB 5 will affect small, family farm operations if independent operators are required to become their employees.”

“To put the seed in the ground, the crop on the road, food on the table while dealing with AB 5 …. It’s just one more rule that doesn’t make it any easier for agriculture,” Strecker said.

Truckers hammered

CTA said in a press release that AB 5 “will put tens of thousands of owner-operator truckers, who service agriculture, retail and other industry sectors, out of business.”

CTA CEO Shawn Yaden said, “AB 5 could have been amended [to] protect the 70,000 predominantly small, locally owned [trucking] businesses with small fleets, independent drivers and minority-owned truckers currently operating as independent contractors.”

Instead, AB 5 throws the trucking industry and agriculture into uncertainty due to its sweeping alteration of employee vs. independent contractor status.

“This is one more regulation that will make billions for the state but will increase operating costs for businesses,” said Michael J. Staples, owner of Hammer Trucking in Woodbridge. “I know a trucker with 50 to 60 pullers who’s 60 years old and he’s shutting down because of AB 5.”

He added that AB 5 author Gonzalez “is unaware of how the trucking industry works regarding agriculture and that you can’t put a blanket regulation over an entire industry and expect it to work.”

Good systems doomed

Dave Phippen, partner of Travaille & Phippen, Ripon almond processers and growers, is troubled by the consequences of AB 5. “We use independent truckers who hook up to our trailers with their trucks and haul harvested almonds from our client’s orchards to our facility,” he said. “These are family companies we’ve worked with for decades. AB 5 will disrupt our operation and affect these haulers too.”

Travaille & Phippen’s transportation operation is, Phippen said, “Fine-tuned for these families who depend on the revenue they receive for the eight to ten weeks they work for us.”

AB 5 will, Phippen said, increase costs that will be passed along to their grower customers and “AB 5 throws into chaos a smoothly functioning, effective system that’s not broken. This entire law is evil, we’re against it and our hauling families are too.”

“AB 5 kills incentive and entrepreneurship for independent truckers in California,” said Robert Brown of Brown Sand, Inc. in Lathrop that supplies a variety of soils for agriculture and a wide mix of sand and soil products throughout the Central Valley.

“Our trucking division delivers our product but when we have extra work we dispatch our sub-haulers to take care of it. AB 5 has caused us to separate from our sub-haulers [and] has created a mish-mash of rules and uncertainty about the future.”

He added, “Independent truckers who wanted to grow their business, buy trucks and expand their workforce cannot do that now. AB 5 takes away the future ability of people to move upward in the trucking industry as they’ve done for decades.”

Unintended consequences

Lawsuits have been filed by trucking organizations; Lyft, Uber and DoorDash have invested a combined $90 million to bring the issue to voters as a proposition on the next ballot; and cleanup bills are certain to be employed to “fix” aspects of AB 5 over the next decade.

“Lawsuits could take years,” said Joe Valente, vineyard manager for Kautz Farms and wine grape grower. AB 5 is a “work in progress that we’ll have to monitor closely; it’s sure to create a lot of uncertainty throughout California’s businesses.”

Mark Aldax, branch manager of Mid Valley Agricultural Services for the Oakdale/Escalon/Hughson area said the company “will do our best to comply with AB 5 as written while its challenges are worked out.” Mid Valley Ag currently hires independent contractor truckers to deliver materials to farmers.

Care and control

“Any time I hire a contractor or sub-contractor, I consider them to be someone under my care and control,” said SJFB Second Vice President Jake Samuel. “All OSHA regulations are met. I’m still responsible for these workers.”

He also said AB 5 “muddies it up for ag and business and the public regarding hiring for work. AB 5 means more regulations and bureaucracy for businesses, including ag. In California, I think we all feel beleaguered at times by regulations.”

Litigation begins

The CTA has filed an amended complaint in San Diego federal court arguing that AB 5 not only denies many truckers the ability to work as independent drivers who profit from their own vehicles and setting their own schedules, but also makes it more difficult to classify workers as independent contractors.

The CTA also contends that AB 5 is preempted by a federal law governing working standards in the trucking and airline industries.

It is also in direct conflict with a federal law passed in 1994 that prevents states from enacting laws that affect a motor carrier’s prices, routes and services.

Little said this legal contretemps could have been avoided had lawmakers advanced a broad rule that covered general aspects of the employment sector that could be fine-tuned over time. “Now, ultimately judges will decide the lawsuits regarding employment,” he said.