AB5’s effects on trucking industry argued in Ninth Circuit
September 2, 2020
As part of oral arguments regarding California’s Assembly Bill 5 in relation to the trucking industry, California Deputy Attorney General Jose Zelidon-Zepeda told the U.S. Court of Appeals for the Ninth Circuit that the state’s labor law is not preempted by the Federal Aviation Administration Authorization Act of 1994.
Zelidon-Zepeda told the three-judge panel on Tuesday, Sept. 1, 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.
The significant effect contends that the intent of the state labor law “specifically targeted” the trucking industry. Shortly after the law went into effect in January, the U.S. Southern District Court of California granted a preliminary injunction that blocked California from enforcing it against motor carriers. In March, the U.S. Court of Appeals for the Ninth Circuit denied a motion to halt the preliminary injunction. The Ninth Circuit is tasked with deciding whether the injunction should remain in effect.
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.
The California Trucking Association contends that the B prong of the test would effectively end the owner-operator model in the state.
A law of general applicability?
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.”
AB5’s ‘significant effect’
U.S. Circuit Judge Sandra S. Ikuta said that past Ninth Circuit cases had rules that labor laws were not preempted and asked Tauber why the court should view this case differently.
Tauber said that in those cases that the drivers were employees and that this law would have a larger overall effect on the trucking industry.
“There will be a significant effect here,” Tauber said. “We’re talking about motor carriers who are using owner-operators classified as independent contractors, and the motor carriers would then be compelled to reclassify them as employees and afford them all of the benefits that employees are entitled to under California labor law.
“That is a sea shift of major proportions. Motor carriers would not only have to hire the employees. They then would have to acquire trucks for those employees to drive. They would have to get storage sites for those trucks. They would have to maintain the trucks. They would have to build HR departments in order to manage everything you have to manage with employees.”
During the state’s arguments, Judge Mark J. Bennett asked Zelidon-Zepeda if the ABC test was an “all-or-nothing” test.
“Do you agree that this is an all-or-nothing test and that with prong B there can never be independent contractors rather than employees doing the work at issue here,” Judge Bennett asked.
Zelidon-Zepeda said it was “difficult to make that determination, because we don’t have a particular business entity raising this.”
Andrew Kushner, an attorney representing the International Brotherhood of Teamsters and serving as Zelidon-Zepeda’s co-counsel, contended that the business-to-business exemption to AB5 could allow motor carriers to continue using owner-operators.
“The application of that portion of AB5 is determined by the courts,” Kushner said. “It’s not the state’s call of whether or not that would apply.”
OOIDA’s amicus brief
In May, 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.”