The Chairman's Corner

By John Chipman, Jr.

July 2020

Do you think AB5 is the only sucker punch aimed at California movers? Think again. Congress’ Protecting the Rights to Organize Act of 2019 (“Pro Act”) is potentially a Jiu Jitsu style choke hold on the business necks of all 50 states.  The Pro Act would expand the definition of “Joint Employer”, strengthen Labor Unions, and make it legally impossible for Van Lines and independent movers everywhere to utilize the independent contractor model. Before that happens, here’s what movers should know about the Pro Act.

Most businesses aren’t familiar with the Pro Act, but they should be. The bill quietly passed the House of Representatives in February while most Americans were focused on the Impeachment proceedings. The Senate refused to vote on the bill. Unfortunately, this doesn’t mean the Pro Act is dead. If voters change the leadership in the Senate and White House during the November elections, the Pro Act will rise from the grave. A change in the political balance of power in Washington could mean the Pro Act could become law in early 2021. “In the event the Senate flips, Democrats have voiced this legislation would be among their first priorities”, according to Katie McMichael, Director of Government Affairs for the American Moving & Storage Association.

Where did the Pro Act come from? It turns out Hollywood movies, Napa wines, and In & Out Burger are not the only things CA is exporting to the rest of the Country. CA’s AB-5 was packed and loaded in Sacramento and sent via exclusive van to Washington DC politicians who embraced it with open arms. When they unpacked AB-5 they found a new way to attack the independent contractor model. Just like AB-5, the Pro Act creates a presumption of an employment relationship between employers and independent contractors (ICs). The presumption can be overcome by meeting the standards of CA’s so called three part “ABC Test”. Most relationships with ICs can pass parts A and C of the test. However, Part B is legally insurmountable when applied to the moving industry’s typical sub hauler relationship, including local, intra and interstate drivers.

Part B sounds harmless enough: “the service is performed outside the usual course of the business of the employer…” The problem is ICs perform intra state and interstate moving services, which is within the core business the moving industry provides to its national, commercial and private customers. As the District Court noted in January, 2020, “the ABC test appears to be rigged in such a way that a motor carrier cannot contract with an IC owner-operator without classifying them as employees.” California Trucking Association v. Becerra.

If enacted, the Pro Act would fundamentally change how movers operate throughout the US. ICs wouldn’t be entrepreneurs; they’d be employees. ICs would be denied the opportunity to take on greater risk in exchange for higher compensation, flexible scheduling, and the ability to accept and reject work as they see fit. According to Chuck White of the International Association of Movers, “The moving industry is seasonal in nature. Our valued ICs need to be able to continue to set their own company footprint, without forced employment, and other arrangements not to their benefit.”

Van lines and independent movers would suffer, too. If ICs become employees then the expense and liability would shift overnight to the “presumptive employers”. Unions would surely be tempted to organize interstate drivers. AMSA’s Katie McMichael sums it up this way: “The Pro Act seeks to enact a wish list of the labor unions. Businesses could suddenly face liability for workplaces they don’t control and workers they don’t employ. It would eliminate all Right-to-Work laws. This would be a nightmare for the moving community.” The shift in expense and liability would also mean revaluating many customer contracts. With the economy in a Covid-19 headlock, is there a mover in the US who wants to renegotiate agreements with national accounts and RMCs?

More ominously, movers who fight to retain the IC business model against the Pro Act would face the risk of governmental enforcement actions, as well as criminal and civil penalties.

The Pro Act could end the injunction of AB-5 in CA. CA Movers have slipped out of the AB-5 chokehold for the moment. Thanks to the legal expertise of the California Trucking Association (“CTA”) enforcement of AB-5’s ABC test by CA has been temporarily enjoined as to any motor carrier operating in CA . CTA v. Becerra. Hopefully, the District Court’s injunction will become permanent. Not to get too deep into the legal weeds, but the District Court found that AB-5’s ABC test is arguably pre-empted by the FAAAA Act. The Court writes: “… the FAAAA likely preempts ‘an-all-or-nothing’ state law like AB-5 that categorically prevents motor carriers from exercising their freedom to choose between using independent contactors or employees.” Other Federal Courts have also found that the ABC test runs afoul of FAAA Act. Unfortunately, if it becomes Federal law, the Pro Act could remove the FAAAA defense from the trucking industry, which could spell doom for movers everywhere, not just in CA.

Is it time for the moving industry to tap out under the weight of AB-5 and the Pro Act? Not at all; it’s time to fight. Consider how enactment of the Pro Act would affect your moving company. Will it squeeze the life out of your business? If so, it makes sense for our industry to generously support organizations and congressional candidates that will oppose the Pro Act. Oh, and don’t forget to write your congressperson and vote.

July 2020 - CMSA Communicator