Arkansas Trucking Association

Surcharge for the Golden State

On Jan. 20, FedEx Freight launched a surcharge on all shipments moving to, from and within California.

The $7 per-shipment fee, named the "California Compliance Surcharge," comes a few weeks after Gov. Gavin Newsom signed a bill into law, AB 5, that requires companies to prove workers are independent contractors instead of employees. The law has since been stayed by LA Superior Court Judge William Highberger, who determined the law is preempted by the federal rules of the 1994 Federal Aviation Administration Authorization Act.

FAAAA says that one federal rule on rates, routes and services will take precedence over individual state laws because trucking is a vital part of interstate commerce.

“The independent contractor relationship,” Judge Highberger said, “has been a staple of the trucking industry through nearly 70 years of congressional proceedings and court decisions.”

An attorney for the trucking firms, Joshua Gibson, said in a statement the ruling was "a win for trucking companies and independent truckers nationwide,” establishing that “California cannot simply eliminate that business model and force truck drivers to be employees."

The long legal battles that have led to AB 5 and the continued challenges surrounding its signing are one reason for the high cost of operating trucking business in California.