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Home ACA Compliance The Trucking Industry Faces Challenges with AB5

The Trucking Industry Faces Challenges with AB5

2 minute read
by Robert Sheen

3 minute read:

California’s AB5 has changed the landscape on how independent contractors and employers work together. The trucking industry in particular faces unique challenges in adjusting to the new law, as a large percentage of the truck driving workforce are owner operators that were traditionally classified as independent contractors. Listening to the plea from trucking companies and independent owner operators alike, a federal district court granted an injunction for the California Trucking Association (CTA) in December of 2019 to allow the industry to operate under the status quo.

While the injunction temporarily prevents the state from enforcing the requirements of AB5 on motor carriers, a permanent solution will need to be devised. There has been a lack of guidance for complying with AB5, specifically for trucking companies that carry out business with owner-operator truck drivers. According to a post by trucking info, CTA CEO, Shawn Yadon stated, “AB5 threatens the livelihood of more than 70,000 independent truckers… the bill wrongfully restricts their ability to provide services as owner-operators.”

California AB5 effectively expands the definition of the word employee: “…a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business.”

One of the biggest impacts all employers in the state of California must face in the wake of AB5 are meeting the requirements for offering employee benefits to these new employees, including the requirements of providing healthcare coverage under the ACA. With many contract workers receiving employee status under the new law, employers will now need to account for tracking hours of services, wages, and other employee level details forACA compliance and reporting purposes.

As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA Employer Mandate, organizations with 50 or more full-time employees and full-time equivalent employees are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H npenalties. The healthcare law defines full-time employees as workers who average 30 hours of work a week or 130 hours a month.

Employers will need to incorporate these newly classified employees into their ACA compliance process. Employers will need to extend offers of health insurance coverage to more employees, and reporting requirements will grow in complexity. The volume of forms to be processed will increase, along with the costs associated with distributing1095-C forms to employees and submitting required ACA information to the IRS annually.

Until a permanent solution is implemented regarding AB5 and the trucking industry, employers who operate within the industry should devise a plan for complying with the law and everything that goes along with it.

Obtaining services from a third-party expert for ACA compliance could prove helpful for truckers as the complexities of the Employer Mandate are far reaching and the penalties for failing to comply are steep.

Contact us to learn about ACA Complete and see how we can solve your ACA compliance requirements.

We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Summary
The Trucking Industry Faces Challenges with AB5
Article Name
The Trucking Industry Faces Challenges with AB5
Description
California’s AB5 continues to create challenges for employers that operate in predominantly “independent contractor” environments. The trucking industry is the latest.
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Publisher Name
The ACA Times
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