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November 20, 2020 5:00 PM, EST

California Appeals Court Rules Motor Carriers Not Exempt From AB 5

Decision Doesn't Affect Federal Case
CaliforniaTraffic on a California highway. (Mark J. Terrill/Associated Press)

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The California Court of Appeals has issued an opinion declaring motor carriers are not exempt from a state law aimed at reclassifying owner-operators as employees.

In a Nov. 19 decision, a three-judge panel of the state appeals court said that motor carriers must abide by a new California law, known as Assembly Bill 5, that has raised serious concerns among motor carriers because trucking industry attorneys have said the law makes it nearly impossible to use independent contractors.

The state appeals court ruling reversed a trial court decision in People v. Cal Cartage Transportation Express that used a test to distinguish independent contractors and employees.

However, legal experts say that because the ruling in the California law came in a state court legal challenge to AB 5, it does not have direct bearing on a California Trucking Association lawsuit on appeal with the 9th U.S. Circuit Court of Appeals.

“This opinion does not directly impact the CTA v. Becerra case, in which the federal district court in the Southern District of California issued a preliminary injunction prohibiting the state from enforcing the ABC test against motor carriers,” noted a Transportation Law Alert issued Nov. 19 by the Indianapolis-based trucking law firm of Scopelitis, Garvin, Light, Hanson & Feary. “That case is currently on appeal to the federal 9th Circuit Court of Appeals.”

The 9th Circuit heard oral arguments in the CTA case on Sept. 1, but has yet to issue a decision.

AB 5, originally slated to go into effect on Jan. 1, requires that carriers use a three-pronged “ABC test” that CTA and others have said would virtually make it impossible to use independent contractors.

AB 5 conflicts with the Federal Aviation Administration Act passed by Congress in 1994 that “expressly pre-empts state laws related to prices, routes or services” of any motor carrier, according to CTA.

The ABC test 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.

The defendant in the state case, Cal Cartage Transportation Express, has federally licensed motor carriers that operate trucking and drayage operations in and around the Ports of Los Angeles and Long Beach, and utilize the services of independent owner-operator truck drivers who lease their vehicles and services from the company.

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In its ruling, the state court of appeals court said that the California Legislature in 2018 found that “drayage drivers at California ports are routinely misclassified as independent contractors when they in fact work as employees under California and federal labor laws.”

The court also said that a recent report finds that “two-thirds of California port drayage drivers fall under this category, and rampant misclassification of drivers contributes to wage theft and leaves drivers in a cycle of poverty.”

In April 2018, the California Supreme Court decision in Dynamex Operations West v. Superior Court allowed the so-called “Borello standard,” which weighed a wider variety of factors including the extent of control an employer has over a contractor, to be replaced with the ABC test in deciding if contractors should be classified as employees.

The appeals court noted in its Nov. 19 decision that it had granted the applications of the International Brotherhood of Teamsters, the California Attorney General, the city of Oakland, and the city and county of San Francisco to file amicus briefs in support of the People.

The court also allowed American Trucking Associations, CTA, the Chamber of Commerce of the United States of America and Western States Trucking Association to file amicus briefs in support of Cal Cartage.

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