Landstar advises California owner-operators move out of state due to AB5

Dive Brief:

Landstar is telling its owner-operators in California that they will need to relocate out of state if they want to remain independent contractors with the carrier — or pursue other options — due to the looming implementation of labor law AB5.
During a Q2 earnings call, Vice President and Chief Safety & Operations Officer Joe Beacom said they have been making owner-operator partners aware of the legal update as well as options for their businesses to “relocate out of California or not haul California-originating loads” or switch to their own authority.
The company is also preparing for a scenario in which states outside California could enact similar laws, with Beacom noting the carrier will put “Landstar trailers in the hands of carriers on certain business” if necessary.

Dive Insight:

Some 70,000 owner-operators in California could have their business upended depending on how the state enforces the AB5 labor law, which could reclassify independent contractors as employees.

Following the Supreme Court fallout, California agencies have yet to clarify when enforcement could begin, and the governor’s office said earlier this month that it’s looking into concerns from the trucking industry. State departments haven’t returned a request for comment from Transport Dive regarding timing.

Large carriers have been preparing for implementation of AB5 since it was passed in 2019. Beacom said they developed a playbook at that time, preparing for it and putting a lot of planning into it.

Similarly, J.B. Hunt Chief Operating Officer Nick Hobbs said they’ve been watching the law basically since 2018 and discontinued independent contractors operating on their authority. “Out there, we provide either J.B. Hunt employees or we use brokerage to other motor carriers. So, we feel very confident that it’s not going to interrupt our business,” he said during a Q2 earnings call on July 19.

The total number of owner-operators who lease from Landstar, which the company calls business capacity owners or BCOs, is over 11,000. “It’s a relatively small number of guys, 365 BCOs, and those are the options,” Beacom said, “and we're helping them work through that process.”