What's going on with AB5?
As the regulatory landscape shaping around California AB5 remains murky to date, companies in our moving industry are left with very few choices. In the past when the Dynamex ruling happened in 2018, it was ignored by many. It was only a matter of time until CA then decided to enact AB5 into California labor code to fully put the Dynamex ruling in place.
In January, there was a temporary preliminary injunction on AB5 for independent truckers which gives a fleeting moment of time to prepare. Although arguable whether or not this also applies to movers, it is unclear when the decision will be made and which direction it will go, as injunctions like this have been completely thrown out in the past.
And now, there seem to be three paths forward.
- Ignore AB5 and hope it blows over
- Comply with AB5, and employ all movers as full time employees
- Argue that the movers were always independent partners that are free from control, and position their business as outside the usual course of the main business.
This entire circumstance is unfortunate for those in our industry that always operated with best intentions in mind. Movers that act as owner operators, the righteous contractors, will have their livelihoods altered because of blanket statement laws that are being enacted due to unfair treatment of workers mainly within other industries.
On the flip side, perhaps this is a rude awakening that was bound to happen. It's difficult to provide W2 employee benefits and still remain a cashflow positive business. To those who have always decided to follow the law to a T, this could be a win, forcing an equalizing effect within the industry.
As this battle is fought, the best thing to do is to preserve optionality and to be prepared for the worst case scenario. Top moving companies today are deploying software for movers in order to remain compliant with AB5.
Historically, keeping a full time employee base in place was seen as operationally impossible and incredibly cost prohibitive. But with new software capabilities that can help manage your crews, understand cost structures, and optimize utilization, it could be the case that employing workers full time is not only the best way to compensate employees fully, but also a new way to save costs even more than before.