AB5 not preempted, state court says; Ninth Circuit ruling awaits

As the trucking industry waits on the U.S. Court of Appeals for the Ninth Circuit to make a decision, a California court has determined that a worker classification law is not preempted by federal law.

California Second Appellate District Court Division 2 ruled on April 1 that the Federal Aviation Administration Authorization Act (F4A) does not preempt the state from applying its Assembly Bill 5 law to the trucking industry. It is the second ruling in recent months that says motor carriers are not exempt from the controversial worker classification law.

Meanwhile, it has been more than seven months since the Ninth Circuit heard oral arguments on whether an injunction, which prevents the law from being enforced on motor carriers, should remain in effect.

The state court rulings have no effect until the Ninth Circuit makes its decision.

ABC Test and AB5

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 Jan. 1, 2020.

The California Trucking Association filed a lawsuit over the law, contending that it would end the owner-operator model in the state. The trucking group also said the state law was preempted by the F4A, which prevents states from enforcing a law or regulation related to a price, route, or service of motor carriers.

Shortly after AB5 went into effect, the U.S. Southern District Court of California granted the preliminary injunction to stop the state from enforcing it on motor carriers.

State appeals court rulings

The most recent state court ruling involves truck drivers for East Coast Transport. The drivers claimed that they were misclassified as independent contractors when they were actually employees.

East Coast Transport argued that federal law preempted the ABC Test from being applied to its business.

A similar argument was made by Cal Cartage Transportation Express during its case with the California Second Appellate District Division 4 this past November.

In both instances, the appeals courts ruled that the F4A doesn’t prevent the law from being enforced on trucking companies.

“The court in Cal Cartage rejected an identical argument,” the Division 2 court wrote in its opinion. “In that case, Division 4 of this appellate district concluded that the ABC Test is a law of general application that ‘does not mandate the use of employees for any business or hiring entity.’”

Ninth Circuit

The Ninth Circuit listened to oral arguments in the California Trucking Association’s case on Sept. 1.

California Deputy Attorney General Jose Zelidon-Zepeda told the three-judge panel that a generally applicable state law that doesn’t reference motor carriers couldn’t be preempted by the F4A, which prevents states from enforcing a law or regulation related to a price, route or service of motor carriers.

Meanwhile, the California Trucking Association argues that the state labor law “specifically targeted” the trucking industry.

Representing the CTA, attorney Andrew Tauber told the Ninth Circuit that the law does fall under the F4A.

“AB5 is not a law of general applicability,” Tauber said. “It contains numerous exceptions for numerous industries and professions categorically and contains other exceptions for other industries and professions that are conditionally available. It actually specifically targets the trucking industry.”

Tauber then referenced the bill’s author, California Assemblywoman Lorena Gonzalez, and her comments on the floor of the legislature regarding AB5 and the trucking industry.

“She says AB5 was designed to eliminate what she characterized as the ‘outdated’ model whereby motor carriers use independent owner-operators to deliver services to their customers,” Tauber said. “So it simply can’t be maintained on the record that this was a law of general applicability.”

More than seven months later, a decision could be released any day now.

Amicus brief

In May 2020, OOIDA filed an amicus brief with the Ninth Circuit in support of the California Trucking Association’s lawsuit.

In its brief, OOIDA established that owner-operators are a significant piece of the motor carrier industry and large motor carriers will not be the only ones affected by the law.

“This court should not adopt the blinders that defendants urge,” OOIDA wrote. “AB5’s impact is not limited to large motor carriers, simply a matter of increasing the cost of doing business, or confined to California.

“Instead, for tens of thousands of interstate owner-operators and small-business motor carriers that regularly cross the California border – small-business truckers critical to the interstate motor carrier industry – AB5 could be fatal.” LL