California responds to OOIDA’s AB5 appeal

In a response brief to the U.S. Court of Appeals for the Ninth Circuit, California defended its worker classification law, AB5, and said it does not violate the Constitution.

“California’s Assembly Bill 5 was enacted to address the misclassification of employees as independent contractors,” the state wrote in the brief filed on Monday, Nov. 4. “AB5 adopts the ABC Test as the classification standard for workers in hundreds of industries across the state. The ABC Test makes it more difficult for employers to evade labor requirements than under the relatively manipulable and indeterminate 11-factor balancing test that applied before AB5’s enactment. As a result, more workers stand to gain the benefits and protections provided by California labor law, such as a minimum wage, workers’ compensation coverage and unemployment insurance.”

California signed AB5 into law in 2019. The law has been battled in court ever since. AB5 requires a business to demonstrate three factors are established before a worker can be considered an independent contractor. The B prong of the ABC Test requires the worker being used as an independent contractor to provide a service that is outside the company’s usual course of business. Many in the trucking industry have argued that the B prong effectively ends a longstanding business model of leased owner-operators.

In August, the Owner-Operator Independent Drivers Association filed an appeal to the Ninth Circuit, saying that AB5 specifically targets truck drivers.

“AB5’s blanket prohibition of leased owner-operators constitutes an unreasonable burden on interstate commerce in violation of the dormant Commerce Clause of the U.S. Constitution under the test established by the Supreme Court in Pike v. Bruce Church Inc.,” OOIDA wrote. “Under Pike’s balancing test, AB5’s burden on leased owner-operators is absolute, and the benefits to the state are minimal, if not illusory. There is no cost truckers can incur or administrative hurdle they can overcome to keep their independent contractor small businesses as leased owner-operators.”

OOIDA also contends that AB5 violates the Equal Protection Clause, as California provides an exemption that intrastate truckers can use but federally regulated interstate truckers cannot.

California’s arguments

The state said in its brief that OOIDA has not shown that the ABC Test imposes the type of burden on interstate commerce required under Pike.

“Both this court and the Supreme Court have made clear that state laws do not trigger Pike balancing merely because they impose increased regulatory compliance costs,” the state wrote.

California argues that OOIDA overstates the changes involved in reclassifying a leased owner-operator as an employee.

“OOIDA misstates the effects of classifying owner-operators as employees,” the state wrote. “The only consequence under California law is that motor carriers will be required to provide owner-operators with certain benefits and protections, such as a minimum wage, workers’ compensation, unemployment insurance and sick leave.”

However, opponents of AB5 argue that the shift from owner-operator to employee will mean owner-operators losing flexibility and control over their work.

OOIDA’s reply brief is due Nov. 25. LL