Going to California?
The U.S. Supreme Court opted not to hear a case against California’s Assembly Bill 5 in 2022.
That doesn’t mean the fight is over, however. The Owner-Operator Independent Drivers Association and the California Trucking Association both recently filed motions for preliminary injunctions against the controversial worker classification law.
Background
AB5, which codified the ABC Test, makes it more difficult for a worker to be considered an independent contractor. Many in the trucking industry, including the California Trucking Association and OOIDA, said the law would force the end of the owner-operator model in the state.
The ABC test has three parts:
- 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.
The B prong of the test appears to make it nearly impossible for a leased-on truck driver to be considered an independent contractor.
After the California legislature passed AB5 into law in 2019, the California Trucking Association sought a preliminary injunction with the U.S. District Court for the Southern District of California. The trucking group argued that AB5 was preempted by the Federal Aviation Administration Authorization Act, or F4A, which prevents states from enforcing a law or regulation related to a price, route or service of motor carriers. The law also violates the Commerce Clause of the U.S. Constitution, the California Trucking Association claimed.
The district court found that the law was likely to be preempted by the F4A and granted a preliminary injunction. Pointing to the F4A argument, the court did not tackle the questions surrounding the Commerce Clause.
The injunction remained in place until this past June, when the U.S. Supreme Court denied the California Trucking Association’s petition for a hearing.
The latest
The case was kicked back to the district court, and OOIDA was allowed to serve as an intervenor to represent the interests of small-business truckers who reside in California as well as out-of-state truck drivers hauling loads in or out of the state.
In January, the California Trucking Association and OOIDA both asked the U.S. District Court for the Southern District of California to halt enforcement of AB5.
California has until March to respond to motions from OOIDA and the California Trucking Association, and a hearing is scheduled for May.
OOIDA’s arguments
OOIDA contends that AB5 violates the Commerce Clause, which protects the right to engage in interstate commerce free of undue burdens and discrimination by state governments.
“(OOIDA) seeks a preliminary injunction enjoining the enforcement of Assembly Bill 5 as to those motor carriers who operate in interstate commerce or, in the alternative, as to motor carriers whose drivers are not based in California and spend less than 50% of their working time in California,” the Association wrote in the motion.
As part of OOIDA President Todd Spencer’s declaration to the court, he outlined some of the concerns truck drivers will face under AB5.
“To keep hauling loads to California, they would be forced to give up the businesses they have worked to build and become employees instead of business owners,” Spencer wrote. “They would have to forgo the opportunity to maximize their income through their own effort and hard work. They would likely have to give up the truck they have invested in, customized and maintained as their home to serve their work and personal needs. They would give up business relationships they have cultivated to make their business successful. They would give up the discretion they enjoyed setting their own schedules and lose the ability they have as owner-operators to make their own decisions about their operations that gave them a sense of control over their own success.”
Danny Schnautz, the owner of Clark Freight Lines in Pasadena, Texas, provided the court a concrete example.
He said his company previously ran about eight to 10 loads in and out of California for up to $50,000 in revenue each week.
However, Schnautz said the uncertainty of whether or not California’s law would apply to out-of-state motor carriers has forced them to stop operating in the state and has led them to miss out on that revenue.
California Trucking Association’s arguments
The California trucking group told the court that the state ignored the trucking history’s long history and never provided any guidance on how longstanding businesses could remain in compliance with the statute.
“For decades, motor carriers across the United States have provided freight transportation services through owner-operators – individuals who drive their own trucks and who operate as independent contractors,” the California Trucking Association wrote.
“The state defendants have never articulated how a motor carrier can possibly satisfy the statute, including Prong B of the ABC Test, and they remain intent on enforcing (the law) against motor carriers. They thus continue to threaten irrevocable harm to plaintiffs and the owner-operators who have built businesses in reliance on federal law.”
The California Trucking Association specifically requests the injunction based on the F4A, the Commerce Clause and implied preemption.
Additionally, the group contends that owner-operators do not want to become employee drivers, making the law unworkable.
“Since the preliminary injunction in this case was lifted, it has become abundantly clear that motor carriers cannot simply reclassify existing owner-operators as employee drivers,” the California Trucking Association wrote.
“Because they do not want to be employee drivers, many owner-operators are still seeking a way to remain independent,” including by leaving the state or the industry. LL