Courtroom California

Trucking industry watches closely as lawsuits over Dynamex, meal and rest breaks persist.

July 2019

Mark Schremmer

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A ruling from the California Supreme Court regarding how workers are classified, as well as the state’s meal and rest break laws, has prompted an abundance of court cases that could greatly affect the trucking industry.

At issue is how courts will determine if a truck driver is an employee or an independent contractor and whether or not trucking companies are on the hook for meal and rest breaks when their drivers operate in California.

The results of these cases in the coming years could pave the way for a big shift in how trucking companies function.

 

Dynamex decision

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 all of the factors are established:

 

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

 

While the ruling affected all California businesses, it specifically caused an uproar in the trucking industry. The Western States Trucking Association, as well as the California Trucking Association, quickly filed lawsuits. The trucking groups argue that factor B makes it impossible for a trucking company to hire an independent contractor to haul a load.

“Basically, if a trucking company contracts with an owner-operator in any way, you cannot pass the B part of the test,” Western States wrote on its website. “Should an owner-operator you contracted with decide to sue you, and the case were class certified, the financial liability is massive.”

Western States contended that Dynamex was pre-empted by the Federal Aviation Administration Authorization Act, federal safety regulations, and the Commerce Clause, which pertains to interstate commerce.

In March, however, Judge Morrison C. England Jr. for the U.S. District Court of the Eastern District of California ruled that the Dynamex decision does not create an excessive burden to interstate commerce.

“Western States’ claim that Dynamex invalidates the use of independent contractor drivers, and consequently affects interstate commerce, is unavailing,” Judge England wrote. “California’s wage orders do not prohibit the use of such drivers. Instead, they simply provide a framework for establishing whether a given individual should be deemed an employee or an independent contractor.”

California Attorney General Xavier Becerra lauded the decision.

“This court ruling is a victory for truck drivers and all California workers who put in the time and labor at the behest of their employer,” Becerra said in a news release. “The courts have once again demonstrated that it is well within a state’s right to establish standards for those working within its borders.”

However, the ruling will not keep Western States from continuing its fight. On April 18, the group filed a challenge with the U.S. Court of Appeals for the Ninth Circuit.

“The case sets up the question of how a trucking company can use independent trucking contractors without violating the B prong of the ABC test,” Western States wrote in its online newsletter on March 29.

“We are looking forward to our legal arguments being heard on appeal. We will be perfecting the appeal shortly and remain committed to taking this question to the U.S. Supreme Court if necessary.”

Earlier in March, the U.S. Supreme Court decided not to review a previous ruling over whether federal law pre-empted California’s use of the Borello standard, which was the precursor to the ABC test. The California Trucking Association argued that the Borello standard disrupts the contractual arrangements between owner-operators and motor carriers, which is inconsistent with Congress’ deregulatory goals under the Federal Aviation Administration Authorization Act of 1994.

The FAAAA prevents a state from enacting or enforcing “a law, regulation, or other provision having the force and effect of law related to a price, route, or service any motor carrier … with respect to the transportation of property.”

In Judge A. Wallace Tashima’s opinion for the Ninth Circuit, however, he wrote that the Borello standard is not related to prices, routes or services and therefore is not pre-empted by federal law.

After the U.S. Supreme Court elected not to hear the case, the California Trucking Association said it would focus on fighting the Dynamex decision.

“The misclassification issue and the ability for truckers to be independent contractors continues,” California Trucking Association CEO Shawn Yadon said in a statement. “We remain hopeful our legal challenge to California’s more recent Dynamex ruling, which is an essential outright ban on independent contracting, will demonstrate to the court the dire impact the state’s quest to eliminate small-business trucking will have on interstate commerce.”

While similar to Western States’ case, the California Trucking Association said its lawsuit shows that the Dynamex decision affects routes and services, as well as prices.

The judge in the western states case “dismissed the plaintiff’s challenge to Dynamex under the FAAAA, concluding that ‘the mere fact that increased costs may result does not trigger pre-emption,’” the California Trucking Association wrote in its response filed in the U.S. District Court for the Southern District of California on April 3. “But even if that is true, it is of no relevance here, where plaintiff’s first-amended complaint contains well-pleaded factual allegations plausibly suggesting that application of Dynamex ‘directly impacts’ not only prices but also the services and routes that CTA’s members offer their customers.”

The California Trucking Association added that it believes it “will be able to prove that the Dynamex rule imposes very significant burdens on interstate commerce.”

 

 

OOIDA’s view

The Owner-Operator Independent Drivers Association is following the cases related to the Dynamex decision.

“The Dynamex decision is very controversial and very complex,” OOIDA’s Manager of Government Affairs Mike Matousek said. “We’re not going to use such certain terms when describing its ultimate impact on motor carriers and owner-operators in California. However, we are paying close attention to the extensive and ongoing litigation.”

Matousek added that much of this stems from trucking companies taking advantage of truck drivers along the California ports. In 2017, USA Today published an investigative series that looked into subcontracting schemes that allegedly exploit truckers at the ports of Los Angeles and Long Beach. Some of the reports said there were truckers who were being paid $150 a day but had to pay $140 per day in leasing fees.

“California carriers – in particular those in the ports – misclassify drivers,” Matousek said. “California lawmakers have responded to that. Perhaps carriers wouldn’t be in this position if they treated drivers better and paid them a living wage.”

OOIDA’s main concern in all of this is to protect the rights of the men and women behind the wheel.

“It’s impossible to predict how this will play out, especially considering all of the parties involved,” Matousek said. “We represent truck drivers, so if this ends up negatively impacting our membership we’ll absolutely get more involved, but I think we’re a ways from that point.”

 

 

Dynamex applies retroactively, court says

Adding to the saga over the Dynamex decision, the U.S. Court of Appeals for the Ninth Circuit determined in May that the standard for classifying workers applies retroactively.

As part of a wage case between a class of janitors and an international cleaning business (Jan-Pro Franchising) that dates back to 2008, the Ninth Circuit panel ruled on May 2 that the ABC test adopted in the Dynamex decision applies and vacated a lower court’s grant of summary judgment. The Ninth Circuit kicked the case back to the district court, saying it should consider all three factors in the ABC test.

“We conclude that Dynamex does apply retroactively, that none of Jan-Pro’s other efforts to avoid reaching the merits are viable, and that the case must be remanded to the district court to consider the merits in light of Dynamex,” Judge Frederic Block wrote in his opinion for the Ninth Circuit.

While the Jan-Pro lawsuit involves a cleaning company, the Ninth Circuit’s ruling could lead to an increase in wage suits in the trucking industry as well.

The ruling “could be devastating to many businesses and requires their attention now,” Jeffrey Horton Thomas, a lawyer at Akerman LLP’s California office, told Bloomberg law.

 

 

California’s meal and rest break laws

In December, the Federal Motor Carrier Safety Administration announced that California’s meal and rest break laws were pre-empted by the agency’s hours-of-service regulations as applied to property-carrying commercial motor vehicle drivers.

The state’s meal and rest break laws require employees to be provided an off-duty 30-minute break for every five hours worked and a 10-minute off-duty break for every four-hour period. The law has led to many class action lawsuits by commercial drivers.

Granting the petitions from the American Trucking Associations and Specialized Carriers and Rigging Association, FMCSA Administrator Ray Martinez said the rules were “incompatible” with federal regulations.

“Safety is FMCSA’s top priority, and having uniform rules is a key component to increasing safety for our truck drivers,” Martinez said in the December news release. “During the public comment period, FMCSA heard directly from drivers, small-business owners and industry stakeholders that California’s meal and rest break rules not only pose a safety risk but also lead to a loss in productivity and, ultimately, hurt American consumers.”

The Teamsters and the California Labor Commissioner’s Office promptly filed challenges in the Ninth Circuit.

“It is well within a state’s rights to establish standards for the welfare of our workers,” Becerra said. “Truck drivers, like every other person protected under California’s labor laws across hundreds of different industries, deserve adequate meal and rest breaks.”

Under a previous administration, FMCSA rejected a similar petition about pre-empting California’s break laws.

“More than a decade ago, FMCSA rejected a similar petition that was submitted to FMCSA,” OOIDA President Todd Spencer wrote in comments on ATA’s petition. “In its decision, the agency noted that California’s meal and rest break laws are not regulations pertaining to commercial motor vehicle safety, not unique to transportation, and the petition exceeded FMCSA’s congressional grant of authority. There is nothing in ATA’s petition that addresses these issues or would otherwise cause the agency to reverse its earlier decision.”

In May, the American Bus Association petitioned FMCSA to add drivers of passenger-carrying commercial motor vehicles to the list of those who are exempt from California’s meal and rest break rules. As of press time, the agency hadn’t made a decision.

Also in May, the U.S. District Court for the Central District of California granted partial summary judgment to U.S. Xpress’ motion regarding California’s meal and rest break laws. A class of truck drivers filed suit against U.S. Xpress in 2016, claiming wage and meal and rest break violations.

The court said it lacked the authority to review the merits of FMCSA’s decision to pre-empt.

The decision by the court points to a potential shift in favor of the trucking companies in these cases, or at least until the Ninth Circuit rules in the challenges to FMCSA’s decision.

“This court is bound by the FMCSA order and will apply the order unless and until it is invalidated by the Ninth Circuit,” the California federal court wrote. LL

 

Mark Schremmer

Mark Schremmer, associate editor, joined Land Line in 2015. An award-winning journalist and former assistant news editor at The Topeka Capital-Journal, he brings fresh ideas, solid reporting skills, and nearly two decades of journalism experience to our staff.

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