California’s AB5 doesn’t apply to trucking, state judge rules

A California law aimed at determining whether a worker is an employee or an independent contractor doesn’t apply to trucking, a state court judge ruled.

Los Angeles Superior Court Judge William Highberger ruled on Jan. 8 that California’s Assembly Bill 5, which went into effect on Jan. 1, is preempted by the Federal Aviation Administration Authorization Act of 1994 (F4A).

“Here the requirements of the ABC test … clearly run afoul of Congress’ 1994 determination that a uniform rule endorsing use of nonemployee independent contractors should apply in all 50 states to increase competition and reduce the cost of trucking services,” Highberger wrote.

The ABC test

In 2018, the California Supreme Court established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that all of the 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.

California’s AB5, which codifies the state’s Supreme Court decision, was signed into law by Gov. Gavin Newsom in September.

The law quickly found opponents from a variety of industries. Companies, such as Uber, Lyft, and DoorDash, started a ballot initiative in an attempt to become exempt from the law. In addition, the American Society of Journalists and Authors, and the National Press Photographers Association filed a lawsuit.

In trucking, opponents of the law argue that the B factor of the test would end the owner-operator model as we know it. The Jan. 8 ruling serves at least as a temporary victory for motor carriers and owner-operators opposed to California’s AB5.

State judge’s ruling

Judge Highberger’s ruling came in California’s case against California Cartage Co. for alleged misclassification of truck drivers. Deciding that California’s AB5 is preempted means the lawsuit will proceed under a previous, more flexible standard of determining employment.

“After careful consideration, the court agrees with defendants that the currently operative legal requirements for determination of employee versus independent contractor status are preempted as to certain motor carriers and their drivers by an act of Congress,” Highberger wrote. “A preemption determination is not a relative weighing of the desirability of a given state’s legal regime as opposed to the rules which Congress seeks to impose. Rather, it is simply a determination that Congress has exercised its overriding powers under the Supremacy and Commerce clauses of the United States Constitution to require a uniform rule to apply in all 50 states.”

Federal case

A separate federal case also is looking at the possibility that the F4A preempts the California’s AB5 law.

On Dec. 31, the U.S. District Court for the Southern District of California granted the California Trucking Association’s motion for a temporary restraining order to block California from enforcement of the law on motor carriers.

As part of granting the temporary restraining order, U.S. District Judge Roger Benitez said that the California Trucking Association established that the law could cause imminent, irreparable harm to motor carriers.

“Plaintiffs have shown that AB5’s prong B is likely preempted by the F4A because AB5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are,” Benitez wrote.

The lawsuit contends that the F4A preempts state regulation of the trucking industry.

“A state … may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier or any motor private carrier, broker or freight forwarder with respect to the transportation of property.”

The California Trucking Association said that deregulation requires states to not interfere with the enforcement of private contracts.

“In enacting the F4A, Congress’ overarching goal was helping ensure transportation rates, routes, and services that reflect maximum reliance on competitive market forces, thereby stimulating efficiency, innovation, and low prices, as well as variety and quality,” the trucking group wrote in its lawsuit.

The temporary restraining order will remain in effect pending the court’s resolution of the trucking group’s motion for a preliminary injunction, which is set for hearing on Jan. 13.

What’s next?

Developments in both cases are positives for opponents of California’s AB5, but the legal battles are likely far from over.

“This is just the beginning of what is expected to be a very long legal challenge,” the Owner-Operator Independent Drivers Association wrote to its more than 160,000 members on Jan. 10. “OOIDA’s legal team is currently reviewing these rulings, other pending lawsuits, and options for legal action of our own. We’ve always maintained that misclassification in trucking is a very real issue, but California’s legislative approach was overly broad and unnecessarily chaotic. Simply outlawing independent contractors in trucking is unacceptable.

OOIDA President Todd Spencer said California lawmakers rushed AB5 across the finish line without considering all of the ramifications.

“While AB5 was undoubtedly designed to address legitimate issues the state is dealing with, in its haste to come up with something, lawmakers clearly did not consider all the ramifications and extenuating circumstances involved,” Spencer said. “A time out is definitely called for to examine how all the pieces can work together and make sure that the “something” they come up with doesn’t create a bigger mess along the way.”