AB5 not preempted, state appeals court rules

A California appeals court has ruled that the state’s worker classification law, known as Assembly Bill 5, is not preempted by federal law.

The Court of Appeals for California’s Second Appellate District issued the opinion on Thursday, Nov. 19 in response to a lawsuit against Cal Cartage Transportation Express, CMI Transportation and K&R Transportation.

The state ruling does not affect the California Trucking Association’s lawsuit in U.S. Court of Appeals for the Ninth Circuit. Oral arguments in that case were heard on Sept. 1, and a ruling could be announced soon. In both cases, it was argued that AB5 was preempted by the Federal Aviation Administration Authorization Act of 1994, which prevents states from enforcing a law or regulation related to a price, route or service of motor carriers.

In 2018, the California Supreme Court’s Dynamex decision established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that three factors are established.

A. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.

B. That the worker performs work that is outside the usual course of the hiring entity’s business.

C. That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

In September 2019, California’s Senate passed AB5, which codifies the California Supreme Court’s decision. The law, which was intended to apply to a variety of industries, went into effect on Jan. 1.

Opponents of the worker classification test argue that the B prong of the test makes it impossible for the owner-operator model to continue in the state.

The state case stems from charges that truck drivers working in and around the ports of Los Angeles and Long Beach were misclassified as independent contractors. The defendant trucking companies argued that AB5 is preempted by the F4A.

The state appeals court ruled the worker classification law is not preempted.

“The ABC test does not mandate the use of employees for any business or hiring entity,” the court stated. “Instead, the ABC test is a worker classification test that states a general and rebuttable assumption that a worker is an employee unless the hiring entity demonstrates certain conditions. That independent owner-operator trucker drivers, as defendants currently use them, may be incorrectly classified, does not mean the ABC test prohibits motor carriers from using independent contractors. The ABC test, therefore, is not the type of law Congress intended to preempt.” LL