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June 17, 2020 9:30 AM, EDT

California AG Xavier Becerra, Trucking Group Spar Over AB 5

Traffic in Los AngelesTraffic on I-10 in Los Angeles by Mark J. Terrill/AP

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Arguments by the California Trucking Association aimed at blocking enforcement of a new independent contractor law using the federal pre-emption clause are being challenged in a new court brief filed with the 9th U.S. Circuit Court of Appeals by California Attorney General Xavier Becerra.

The new law, known as Assembly Bill 5, is aimed at reclassifying owner-operators as motor carrier employees.

AB 5, which prior to the CTA legal challenge was set to go into effect Jan. 1, conflicts with the Federal Aviation Administration Act passed by Congress in 1994 that “expressly pre-empts state laws related to a price, route or service of any motor carrier,” according to CTA.

Xavier Becerra

Becerra

“For decades, motor carriers throughout the U.S. have arranged for freight to be transported by owner-operators, who drive their own trucks and provide their services as independent contractors,” CTA argued in an 84-page legal filing last month. “Owner-operators play a critical role in interstate commerce — one that Congress has recognized and protected.”

At the center of the legal dispute is that California’s AB 5 calls for a three-pronged “ABC test” that requires motor carriers to classify their workers as employees unless the employer demonstrates that the worker is free from the control of the hiring entity; the worker performs work outside the usual course of the hiring entity’s business; and that the worker is customarily engaged in an independent trade or occupation.

The second part of the three-prong test is the one that many carriers say they have found next to impossible to demonstrate.

But Becerra claimed in a brief filed earlier this month that CTA’s arguments regarding the business implications of AB 5 do not equate to it falling under the F4A pre-emption clause.

"Ultimately, plaintiffs’ claim is that they will be unable to treat their drivers as independent contractors, which will make their current business model less profitable, and they will choose to raise prices, reconfigure routes, or curtail services to maintain their profits,” Becerra wrote. “But the FAAAA does not preserve a particular business model or guarantee certain profits.”

ABC Test

The three-pronged ABC test dictates that a worker is considered an independent contractor to whom a wage order does not apply only if the hiring agency establishes:

  • A: That the worker is free from the control and direction of the hirer in connection with the performance of work, both under the contract for the performance of such 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 the work performed for the hiring entity.

Becerra’s brief added, “At heart, plaintiffs argue that AB 5 is pre-empted because it will purportedly interfere with their ability to continue classifying their drivers as independent contractors, a business model that has allowed plaintiffs to achieve cost savings,” Becerra said.

But CTA has argued that the ABC test is incompatible with the owner-operator model.

“As the district court explained, because drivers necessarily perform work within the usual course of the [motor carrier’s] business, Prong B of the ABC test means that a motor carrier cannot contract with independent contractor owner-operators without classifying them as employees,” CTA said.

Becerra’s brief said that in codifying the ABC test, the California Legislature cited concerns regarding the misclassification of state workers as independent contractors, which it concluded was a factor in a rise in the state’s income inequality.

Becerra said that by codifying the ABC test into law, the result would be “restoring these important protections to potentially several million workers.”

The 9th Circuit Court has been asked by Becerra and the International Brotherhood of Teamsters to review a federal district court’s injunction issued in favor of CTA. The appeals court has said it will fast-track oral arguments on the issue of whether to block AB 5’s implementation. The oral arguments hearing has not yet been scheduled, but some expect it to happen as soon as July.

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