AB5 (California Assembly Bill 5) is a law that went into effect in California at the start of 2020. Generally speaking, the law requires trucking companies to reclassify independent contractors as employees. AB5 uses the ABC test to define an independent contractor.
Part A states that the worker is considered a contractor if they are free from the control of the hiring entity in terms of work performance.
Part B suggests that the worker performs work that is outside of the course of the business.
Part C states that the worker must be engaged in an independently established trade, or occupation to be considered a contractor.
One of the major issues that trucking companies face in regard to the integration of AB5 is the fact that the state will start to take action against the trucking businesses. Besides having to comply with these new California trucking laws, companies would also need time to adapt accordingly. However, the most difficult requirement for trucking companies is part B of the ABC test. To summarize, the statement defines an independent contractor as someone who performs work outside of the hiring entity’s business. As the majority of the trucking companies work with independent owner-operators to provide almost all of the trucking services, this part of the AB5 law is very hard to deal with and adapt to.
One possible solution to AB5 is for carriers to pay their drivers through a “two-check system”. Under this system, the driver becomes an employee of another company such as a brokerage firm. At the same time, the driver enters into a rental agreement with a trucking company to rent their equipment. The first check is given to the driver for employment and the second for the rental of equipment. Otherwise the only other option an independent driver has is to become an owner/operator themselves. This would require them to get their own motor carrier authority, establish their own company and pay for insurance and other business expenses. Such a venture is rather expensive and can cost as much as $20k just to get up and running.
Now that we have looked at the description of AB5 and its impact on the trucking industry, let’s look at the history and structure of trucking, as well as some recent trucking news, and future trends. Additionally, we have also elaborated more on the intersection of sustainability and trucking, as it is the practice that top trucking companies strive to engage in as much as possible.
The History and Structure of Trucking Industry
It is very interesting to learn that trucks became popular during World War I. They were used mostly for military purposes. However, the history of the trucking industry started to evolve more as the US invested into highway infrastructure and thus began the perpetual affair of construction and road development. First, the trucks used in the industry were very simple, with hard rubber tires, and were used mostly as motorized wagons. However, with the introduction of air-filled tires in the 1920s, travel became easier and more straightforward. An additional important historical fact to mention about the US trucking industry is closely tied to the name of Dwight D. Eisenhower, an American military officer, who became the president of the United States in 1953. While participating in World War II in Germany, Eisenhower was very impressed by the high-speed road system called the Reichsautobahn. After being elected as the president of the US, he started the construction of a highway system, which was introduced to the public as the National Defense Highway System. The initial aim of the system was to protect the public in case of evacuation or any military hazard. However, over time many other industries of the US economy started to take advantage of the highway system, which consequently led to the development of trucking services.
In terms of the trucking industry structure, it is important to mention that trucking is classified as a service industry. A major perception about local trucking companies is that they need to have a large fleet to be considered a trucking business. However, there are many trucking companies in the industry that have only one truck and a single driver.
Rules and regulations stand for another major part of this industry structure. Besides the laws that were discussed previously regarding California AB5 and the trucking industry, there are other regulations that control the structure and operations of trucking. For example, each driver needs to have a Commercial Driver’s License to be eligible to drive a truck. Furthermore, if the trucking company is transporting hazardous materials, there is a need to acquire the HazMat Certification.
Lastly, from a political point of view, both federal and state governments are actively engaged in managing the structure of the trucking industry. As the sector is predicted to grow at quite a rapid rate, there is a need for the constant introduction of laws and regulations to better control this growth as well. For example, with the growing number of trucks on the streets, the government sees some potential hazards to public safety. That is why there are some laws that prohibit trucks from entering certain streets.
Labor Market: AJR Trucking as an Example of One of the Best Trucking Companies
In 2019 only the US trucking industry handled around 73% of freight. With these large amounts of loads to be transported, it is crucial to talk about the role of the labor market that helps run the operations of the largest trucking companies. Naturally, there is a need to engage more people in the industry to keep up with the current workload and the expected growth rate. However, no matter how many new trucking jobs are available, there is a shortage of many professionals. More specifically, there is a huge demand for truck drivers.
One of the reasons behind this shortage is that many people are retiring rather than entering the industry.
To address this issue, top trucking companies, such as AJR Trucking, provide appealing work benefits to attract more drivers. Another important change in the trucking industry that is also aimed at tackling the issue of driver shortage is the engagement of women in the industry. With the largest trucking companies offering many benefits for women, the number of female truckers is slowly growing, which can possibly cover the issue of driver shortage at least a little.
When it comes to the practices that AJR Trucking uses to stay one of the best trucking companies in the US market, professionalism and leadership are two of the main concepts that the company integrates into both the hiring process and the management of the current workforce. Many truckers choose to work with AJR Trucking because the company gives each worker the opportunity for self-actualization, which is very important in every job or industry that you choose to work in.
Current Trends of the Trucking Industry
As already mentioned above, one of the major trucking industry trends is the major growth rate in freight trucking. It is expected that the numbers will grow by 24% by the end of 2022. This means an increase in revenue for the trucking industry by 67%. Consequently, these growth trends will also create many job opportunities in the market.
Additional trends in the industry are team truck driving and the integration of eco-friendly practices. Let’s discuss each one of these separately.
Team truck driving is a method implemented by the biggest trucking companies in the US, which allows two drivers to drive the same truck. One of the drivers starts the commute, and when they need to catch up on their sleep and rest, the second driver takes control of the wheel.
Concerning eco-friendly practices and their integration by many trucking companies, this practice slowly shifts from a trend to a necessity. With rising greenhouse gas emissions, as well as the increase in gas prices, the reputable trucking companies in the US, like AJR Trucking, have started to invest in the acquisition of electric trucks, which would be both environmentally friendly and cost-efficient for the company.
Sustainability and Trucking: Why Is It Important for Drivers?
Research shows that 88% of consumers align with sustainable and ethical companies. In other words, a sustainable business represents trust and responsibility for customers. Furthermore, truckers also pay close attention to the sustainability practices of a company before they decide to join. Working for a sustainable company does not only mean being environmentally friendly, but it also signifies healthy company culture. In fact, sustainable companies tend to concentrate deeply on employee satisfaction. For example, truckers want to feel that the company they work for cares for their work-life balance. Moreover, the best trucking companies, such as AJR Trucking, which are known for their sustainability initiatives, constantly implement strategies and techniques to eliminate any possible challenges that drivers might face on the road. Some examples of such strategies are fleet tracking and management.
Future of the Trucking Industry
As a final note, let’s look at the future of the trucking industry. With the development of Artificial Intelligence (AI), many industries started to make use of the benefits that this technology offers. In the trucking industry AI is used to control and drive trucks without a driver. Top trucking companies, like AJR Trucking, also use collision mitigation systems (CMS) to prevent the trucks from colliding with objects or people through sensor integration which detects anything that is moving on the road beforehand.
Generally, trucking is an evolving industry. No matter the future laws and regulations, the growth rate of the industry is expected to increase. Come back to our website for the latest trucking industry news and forecasts.
