Among the major issues still being debated by the California Legislature this year is whether to codify a new standard for determining if certain workers must be hired as employees rather than independent contractors. AB 5, authored by Assembly member Lorena Gonzalez, is a top priority for organized labor and, as you might expect, is drawing considerable opposition from some segments of the business community, such as technology, agriculture, and trucking industries.
One largely overlooked angle to the debate is the impact some misclassified workers, largely truckers, have on California’s efforts to clean the air and fight climate change. UCS is supporting AB 5 because we see the bill as a way to help workers and our environment.
What is AB 5?
In 2018 the California Supreme Court issued a unanimous ruling in Dynamex Operations West, Inc v. Superior Court of Los Angeles that established a new standard for determining whether workers must be classified as employees rather than independent contractors. The Court established a three-point test, which it calls an “ABC test,” to determine whether workers may be classified as independent contractors. Under the test, a worker must be hired as an employee unless all three of the following are proven:
- the worker is free from control and direction of the hiring entity;
- the worker performs work outside the usual course of the hiring entity’s business; and
- the worker is customarily engaged in an independently established occupation of the same nature as the work performed.
AB 5 would codify the Dynamex decision in state law and create exemptions for occupations where the Legislature believes the stringent ABC test is not warranted (such as doctors, realtors, and hair dressers, among others). Much of the public debate about AB 5 has surrounded “gig economy” workers, namely those who provide services to the public via the cornucopia of app-enabled companies that have sprung into existence in the last decade or so, such as Uber, DoorDash, and TaskRabbit.
However, the use of independent contractors is not an entirely new phenomenon. Since the 1970s many industries have shifted from an employment model to a contractor model. A chief example is the commercial trucking industry, where trucking companies began shifting decades ago from hiring drivers as employees to hiring drivers as independent contractors. Unfortunately, this shift has reduced pay and shifted liability for maintaining trucks to the drivers. Notably, it has also made it harder to reduce air pollution.
Contract truckers and dirty air
Diesel exhaust in California is responsible for 70% of the cancer risk from airborne toxics and so the state has taken an active role in reducing pollution from diesel trucks. The most significant regulation to address air pollution from diesel trucks has been the Truck and Bus Regulation. This rule, originally adopted in 2008, requires the owners (or lessees) of most heavy-duty diesel trucks to add a diesel particulate filter to their vehicle or upgrade to a newer truck. Ultimately, all trucks will need to be upgraded to model year 2010 or newer engines by 2023.
The Truck and Bus regulation is already having a big impact. Particulate matter emissions from vehicles subject to the rule have declined about 70% since 2010. Despite this success, compliance and enforcement has been a challenge, evidenced by the fact that particulate matter emissions are about double what they would be if all trucks were in compliance with the regulation.
Which trucks are disproportionately out of compliance with the rule? It’s small truck fleets, which is the category most often associated with misclassified independent contractors. (I should note that not all independent contractors are misclassified; some are truly independent businesses.) The regulation’s 2017 annual enforcement report (see Appendix I) shows that 39% of fleets with one to three trucks are out of compliance, meaning the truck has failed to add a particulate filter or upgrade to a newer, cleaner engine. It is understandable that some individual truck owners have a hard time coming up with the money to upgrade their equipment, or perhaps are still not aware of the rule. The state has recognized these real challenges and responded with delayed compliance for small fleets, funding, and outreach to help truckers comply.
What’s frustrating is that many of the truckers who are considered a small “fleet” are actually leasing their services to a single, large trucking or freight company that have ample capital to finance investments in cleaner trucks. Clarifying worker classifications would help ensure that companies hire as employees the workers who do the work of employees, and as such, take responsibility to pay for their workers’ equipment. This will help remove a troublesome bottleneck in our collective efforts to clean the air.
Proper worker classification will reduce diesel pollution
As important as the Truck and Bus Regulation has been to reducing diesel pollution, in many ways the real challenge of transforming heavy-duty transportation is just beginning. To reach net-zero global warming emissions by 2045 and federally-mandated air quality standards, California must move aggressively to electrify as much of the transportation sector as possible. To accomplish this, new rules are needed to require manufacturers to make electric trucks, and fleet owners to buy them.
Fortunately, the technology for electric trucks is quickly developing, and is already fully commercialized for many use cases. And while fuel and maintenance costs are cheaper for electric trucks than diesel trucks, the upfront costs are higher. This makes it harder for undercapitalized truckers to upgrade their equipment, meaning that we’ll fail to quickly transform the trucking sector to electric trucks if misclassified contract truck drivers bear the burden of financing new electric trucks.
All workers deserve fair pay and employment benefits for the work they perform. That’s reason enough to support the goals of AB 5. But the obstacle that misclassified truckers pose to our clean transportation agenda should not be missed. It’s time to make sure that all truckers in California are properly classified and that more clean and electric trucks quickly get on the road.