May 4, 2021 4:30 PM, EDT

California Trucking Association to Appeal AB 5 Decision

Trucks on highway Traffic on I-10 in Los Angeles. (Mark J. Terrill/Associated Press)

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The California Trucking Association will appeal a court decision on the state’s independent contractor law that many in trucking deem unfavorable to the industry, CTA CEO Shawn Yadon said on May 3.

A three-judge panel of the 9th Circuit Court of Appeals on April 28 rejected a lower court’s preliminary injunction that halted implementation of a new California law aimed at reclassifying independent contractors as employees. According to Yadon, CTA will now seek an “en banc” review by the full appellate court.

The ruling by the 9th Circuit panel was an early round in what is shaping up to be a long-term fight in the appellate courts by CTA, which claims the state law, known as Assembly Bill 5, or AB 5, will make it impossible to continue with the independent operator model in the state.

The three-judge appellate panel said the lower district court abused its discretion by enjoining the state of California from enforcing the law against motor carriers doing business in California, saying the law is a “generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind, compel or otherwise freeze into place the prices, routes or services of motor carriers, and is not pre-empted by the Federal Aviation Administration Authorization Act.” Stakeholders including CTA argue the state law is, in fact, pre-empted by the Federal Aviation Administration Act of 1994, which “expressly pre-empts state laws related to a price, route or service of any motor carrier,” according to CTA.

This appeal of that panel’s decision must be filed within 14 days of its ruling, according to court rules. There are 29 judges in the 9th Circuit, who after the appeal is filed would vote on whether to rehear the case. If a simple majority agrees to review the panel’s decision, a clerk would then assign 11 judges to hear it, according to Greg Feary, a managing partner of Indianapolis-based law firm Scopelitis, Garvin, Light, Hanson and Feary PC. Feary’s law practice includes independent contractor law.

If the full appellate court agrees to review the case, the lower court’s injunction will stay in place at least until a final decision in the case, Feary said.

Feary believes the fight over AB 5 could go on in the appellate courts for as long as two years, and said if it reaches the U.S. Supreme Court would stand a good chance to be decided in CTA’s favor.

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.

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.

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

The court case, which pits CTA against the Attorney General of California and the International Brotherhood of Teamsters, dates to October 2018, when CTA filed a lawsuit alleging that motor carriers were pre-empted from the AB 5 law by the FAAAA law.

California’s AB 5 was set to go into effect on Jan. 1, 2020, but the injunction paused enactment.

The lawsuit contends that independent contractors are essential for carriers to meet the fluctuating demand for highly varied services, and motor carriers contract with owner-operators to provide trucking services.

“Because the demand for shipment of goods fluctuates depending on the season, consumer demand, overseas orders, natural disasters, type of truck and a multitude of other factors, many motor carriers depend on the use of individual owner-operators to provide consistent, uninterrupted, skilled and specialized trucking services to their customers,” the lawsuit said.

In response to the panel’s decision, Yadon said that CTA will continue to stand by its initial claim that the implementation of AB 5’s classification test is pre-empted by federal law and is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the transportation industry.

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

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