AB5 case heats up ahead of next battle

The California Trucking Association and the Owner-Operator Independent Drivers Association aim to prove that California’s worker classification law, Assembly Bill 5, violates the U.S. Constitution.

In late September, the two trucking groups filed briefs in U.S. District Court for the Southern District of California. Oral arguments in the case are scheduled for Nov. 13.

OOIDA, which is serving as an intervenor in the case, told the court that AB5 failed to fix the problem of misclassified truck drivers in California. Instead, the state law created a burden for legitimate independent contractors.

“Defendants state that the purpose of AB5 is to address the misclassification of workers in California,” OOIDA wrote in its brief. “Instead of routing out truck driver misclassification, the law’s ABC Test automatically classifies all independent contractor truck drivers as employees and eliminates their small businesses from the trucking industry.”

OOIDA told the court that California’s law violates the U.S. Constitution.

“These consequences of the ABC Test to the trucking industry are a major disruption to interstate commerce,” OOIDA wrote. “Thousands of properly classified independent contractor businesses are terminated. The universe of drivers and motor carriers willing to haul freight in California and expose themselves to liability under AB5 is greatly narrowed. And those carriers and drivers who change their fundamental business models to comply with AB5 face significant burdens to do so.”

The California Trucking Association, which is the original plaintiff in the case, also said that AB5 is in violation of the Federal Aviation Administration Authorization Act, the Commerce Clause, implied preemption and the Equal Protection Clauses.

How we got here

California passed AB5 into law in 2019. The AB5 worker classification law is based on the ABC Test, which considers all workers to be employees unless the hiring business demonstrates that all of these factors are established:

1. 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
2. The worker performs work that is outside the usual course of the hiring entity’s business
3. The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed

Pointing to the difficulties of meeting the B prong of the test, opponents argued that AB5 would force the end of the owner-operator model in the state.

The California Trucking Association received a preliminary injunction in 2019 based on arguments that the law violated the F4A. The injunction remained in place until late June 2022, when the U.S. Supreme Court denied the state trucking group’s petition for a hearing.

The case was sent back to the lower courts, and in 2022, OOIDA joined the California Trucking Association’s fight as an intervenor.

OOIDA is representing the rights of small-business truckers who travel in and out of California.

The California Trucking Association and OOIDA have claimed that AB5 violates the Commerce Clause, which protects the right to engage in interstate commerce free of undue burdens and discrimination by state governments.

“(AB5) exempts several in-state professions and industries from the ABC Test, while imposing increased burdens on motor carriers engaged in interstate commerce, disproportionately lowering the cost of doing business for intrastate businesses,” the California Trucking Association wrote in its September brief. “There is no legitimate justification for a disparate treatment or for allowing California to erect barriers to a national market.”

OOIDA’s brief

OOIDA argued that AB5 violates the dormant Commerce Clause of the U.S. Constitution, as well as the equal protection clause.

While leased-on independent contractors operating in interstate commerce will be classified as employees under AB5, in-state drivers were granted a business-to-business exemption.

OOIDA wrote that the burdens AB5 imposes on interstate commerce far outweigh the local benefits of AB5 to California.

“OOIDA asks the court to declare that the ABC Test violates the dormant Commerce Clause of the U.S. Constitution and to enjoin California’s enforcement of the ABC Test against motor carriers and drivers operating in interstate commerce, or in the alternative, at least against the motor carriers and drivers based outside of California performing less than 50% of their work in California,” the Association said.

It also argued that “there is no rational basis” for an exemption to be provided to an independent contractor operating for the construction industry but not for all motor carriers.

“OOIDA asks the court to declare that the ABC Test violates the equal protection clause of the U.S. and California constitutions and enjoin its enforcement as to all motor carriers and drivers so that all such classes of independent contractor drivers can be classified as independent contractors and, therefore, are treated equally under the law,” the Association wrote.

In addition, OOIDA is seeking preliminary relief in its pending motion for a preliminary injunction from AB5 being enforced on truckers.

Defendant briefs

California Attorney General Xavier Becerra is serving as a defendant, and the International Brotherhood of Teamsters is an intervenor on the state’s behalf.

Becerra argues that AB5 has not created any harm.

“AB5 allows motor carriers to continue working with drivers, much as they did before AB5, by classifying them as employees or by lawfully classifying them as independent contractors pursuant to the statute’s business-to-business exemption,” Becerra wrote. “While classification as employees may require carriers to expend funds on workers’ compensation and other benefits … nothing in California law requires carriers to radically restructure their working relationships in the ways that plaintiffs have imagined.”

The Teamsters called misclassification a pervasive problem.

“Because companies that misclassify drivers do not pay for drivers’ work expenses, such as truck maintenance and (fuel), these drivers’ compensation often falls below the minimum wage.”

However, the California Trucking Association argues that the state never articulated how a motor carrier could possibly satisfy the B prong of the ABC Test. In addition, the trucking group said the state wasn’t prepared to have so many truckers refuse to become employees. LL