SCOTUS declines to hear PDX’s challenge to New Jersey contractor laws

In its latest round of decisions, the U.S. Supreme Court denied PDX North America’s request to hear its case questioning the constitutionality of New Jersey’s independent contractor classification statute.

On Monday, Oct. 4, the Supreme Court declined PDX’s petition to settle a case against the commissioner of the New Jersey Department of Labor and Workforce Development. The lawsuit challenges the state’s independent contractor statute. Specifically, the trucking company claims Federal Aviation Administration Authorization Act of 1994 (F4A) preempts the statute. Additionally, PDX argues the statute is unconstitutional under the Interstate Commerce Clause.

PDX’s lawsuit revolves around audits conducted by the commissioner regarding unemployment compensation obligations. Those audits discovered that PDX hired truckers as independent contractors when they should be considered employees. Consequently, the company owes $1.83 million in contributions to the unemployment compensation fund, interest on those unpaid contributions and financial penalties.

PDX argues that the New Jersey independent contractor statute violates F4A, which ensures that transportation rates, routes and service reflect “maximum reliance on competitive market forces” to stimulate “efficiency, innovation, and low prices” as well as variety and quality, according to the complaint. The company alleges the statute adversely affects prices, routes and/or services. Therefore, the statute should be void as federal law supersedes state law.

Younger abstention doctrine moves PDX case to state proceedings

Last October, the Third Circuit Court of Appeals affirmed a federal district court’s decision to dismiss the case. Both courts found that the proper venue for PDX’s lawsuit is at the state level, not federal. That decision was based on what is known as the Younger abstention doctrine.

The Younger abstention doctrine states that federal courts should abstain from exercising jurisdiction in cases that may interfere with certain pending state litigation when “the state’s interests in the proceeding are so important that exercise of the federal judicial power would disregard the comity between the states and the national government.”

To qualify, the state proceedings must be “quasi-criminal” in nature. In this case, the administrative proceedings to recover unemployment compensation payments are in question. The district court found that certificates filed by the commissioner has the same force and effect of court judgments. Furthermore, the commissioner can issue punitive sanctions to recover payments. Essentially, the administrative provisions to recover unpaid unemployment compensation contributions are closely related to criminal statutes.

With the question of “quasi-criminal” answered, the state also satisfied the remaining three factors to qualify for the Younger abstention doctrine:

• There is an ongoing state proceeding that is judicial in nature.
• The state proceeding implicates important state interests.
• The state proceeding offers an adequate opportunity for the federal plaintiff to litigate federal constitutional challenges.

With all factors of the Younger abstention satisfied, the district and appellate courts ordered the case be moved back to the state. The Supreme Court’s refusal keeps those decisions intact, allowing PDX’s challenge to stay alive but back in the state proceedings.

For more information about the case, click here. LL