‘No rational basis’

California’s Assembly Bill 5 “needlessly” causes genuine independent contractors to become company drivers, the Owner-Operator Independent Drivers Association told the U.S. District Court of the Southern District of California.

OOIDA, which is an intervenor in the case against the state’s worker classification law, argues that AB5 violates the Commerce Clause, as well as the equal protection clauses of the U.S. and California constitutions.

In a reply brief on Oct. 27 and in a hearing on Nov. 13, OOIDA asked the court to declare the worker classification law as unconstitutional and to return the state to the previous standard.

“AB5 discriminates against and imposes undue burdens on interstate commerce in violation of the dormant Commerce Clause, and the disparate treatment of AB5’s business-to-business and construction exemptions violates the U.S. and California constitutions’ equal protection clauses,” OOIDA wrote in the reply brief.

What is AB5?

In 2019, California passed AB5 into law with the purported goal of eliminating instances of workers who were really employees being classified as independent contractors. AB5 is based on the ABC Test, which requires a business to demonstrate three factors are established before a worker can be deemed an independent contractor.

Many in the trucking industry argue that the test is too stringent, as the “B prong” prevents the business from using an independent contractor that performs functions typical for the company. For instance, the B prong stops a trucking company from classifying a truck driver as an independent contractor regardless of the level of control or any other factors.

The California Trucking Association filed a lawsuit in 2019 and received a preliminary injunction based on arguments that AB5 violated the Federal Aviation Administration Authorization Act, commonly referred to as 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.

OOIDA, which is representing the rights of small-business truckers who travel in and out of California, joined the fight after the case was sent back to the lower courts.

California is defending the law, and the International Brotherhood of Teamsters joined the case as an intervenor on the state’s behalf.

OOIDA’s arguments

The Association contends that AB5 destroys the independent contractor model in the trucking industry instead of only eliminating instances of misclassification.

“OOIDA readily concedes that there are bad actors in the trucking industry, as in many industries, who misclassify and exploit workers,” the Association brief states. “But defendants can’t justify eliminating the independent contractor driver business model, needlessly reclassifying genuine independent contractors as employees.”

California offers a business-to-business exemption, but it is available only to intrastate California motor carriers and drivers. OOIDA said that distinction causes the law to violate the U.S. Constitution’s Commerce Clause, which protects the right to engage in interstate commerce free of undue burdens and discrimination by state governments. OOIDA also told the court that the law violates equal protection clauses, because there is “no rational basis” for granting exemptions to intrastate carriers and the construction industry but not to all motor carriers.

State’s arguments

California Attorney General Xavier Becerra contends 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.

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,” the union said.

However, the California Trucking Association argues that the state never articulated how a motor carrier could 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.

It likely will be months before the court issues a ruling in the case. LL