Ninth Circuit rules AB5 not preempted, lifts injunction

The U.S. Court of Appeals for the Ninth Circuit has determined that California’s worker classification law is not preempted by federal law and has removed a preliminary injunction against enforcing the state law on motor carriers.

A long-awaited decision, the Ninth Circuit issued the opinion on Wednesday, April 28, nearly eight months after oral arguments were presented on Sept. 1. The three-judge panel ruled 2-1 that California’s Assembly Bill 5 “is a generally applicable labor law” and rejected the California Trucking Association’s arguments that the Federal Aviation Administration Authorization Act (F4A) preempts AB5 from being applied to the trucking industry.

Judge Mark J. Bennett dissented, saying the California Trucking Association’s members “will now suffer irreparable injury.”

The controversial decision comes about three years after the California Supreme Court’s Dynamex decision established the ABC Test, which considers all workers to be employees unless the hiring business demonstrates that three factors are established.

ABC Test

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.

In September 2019, California’s senate passed AB5, which codifies the California Supreme Court’s decision. The law, which was intended to apply to a variety of industries, went into effect Jan. 1, 2020.

The California Trucking Association argued that the B prong of the test would effectively end the owner-operator model in the state. CTA sued over the law, contending AB5 was preempted by the F4A, which prevents states from enforcing a law or regulation related to a price, route, or service of motor carriers.

Shortly after AB5 went into effect, the U.S. Southern District Court of California granted the preliminary injunction to stop the state from enforcing it on motor carriers.

During oral arguments to the Ninth Circuit, attorneys for the California Trucking Association attempted to demonstrate that AB5 was not a law of general applicability.

“It contains numerous exceptions for numerous industries and professions categorically and contains other exceptions for other industries and professions that are conditionally available,” said Andrew Tauber, an attorney for CTA. “It actually specifically targets the trucking industry.”

Tauber then referenced the bill’s author, California Assemblywoman Lorena Gonzalez, and her comments on the floor of the legislature regarding AB5 and the trucking industry.

“She says AB5 was designed to eliminate what she characterized as the ‘outdated’ model whereby motor carriers use independent owner-operators to deliver services to their customers,” Tauber said. “So it simply can’t be maintained on the record that this was a law of general applicability.”

Judges Sandra S. Ikuta and Douglas P. Woodlock for the Ninth Circuit disagreed.

“AB5 is not significantly related to rates, routes, or services,” the judges wrote in their opinion. “Therefore, we conclude that the F4A does not preempt AB5 as applied to motor carriers.”

Dissent

Judge Bennett issued his dissent, saying AB5 is preempted by federal law.

“I do not agree … that a law like AB5 – which affects motor carriers’ relationships with their workers and significantly impacts the services motor carriers are able to provide to their customers – is not related to motor carriers’ services and thus is not preempted.”

Next steps?

The California Trucking Association said it was disappointed in the decision and intends to pursue all steps to fight the law being enforced on the trucking industry.

“We continue to stand by our initial claim that the implementation of AB5’s classification test is preempted by federal law and is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the trucking industry,” said Shawn Yadon, CEO of the California Trucking Association.

“The California Trucking Association will take any and all legal steps necessary to continue this fight on behalf of owner-operators and motor carriers operating in California.

Possible next steps could include requesting a rehearing en banc, which would allow the case to be heard by all of the judges in the court.

OOIDA, which filed an amicus brief in support of the California Trucking Association, said it was reviewing the decision and determining the next steps. LL

Previous coverage:

• AB5 not preempted, state court says; Ninth Circuit ruling awaits.
• AB5 not preempted, state appeals court rules.
• OOIDA: We don’t support California AB5.