California Trucking Association Takes AB 5 Case to Supreme Court
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The California Trucking Association is asking the U.S. Supreme Court to review a state independent contractor law — known as AB 5 — that it argues should be exempt from enforcement for motor carriers based on federal pre-emption.
The petition seeking the high court’s review comes after the 9th U.S. Circuit Court of Appeals in June declined to reconsider its earlier rejection of CTA’s legal challenge to AB 5. The association maintains that an “ABC test” in the law in effect makes it impossible for motor carriers to continue to use independent owner-operators.
“The 9th Circuit’s holding should not stand,” CTA said in its Aug. 9 petition. “It creates a conflict in the circuits. It rests on a construction of the Federal Aviation Administration Authorization Act of 1994 that departs both from the statutory language and from this court’s approach. It will cause disuniformity in national commerce while disrupting the operations both of motor carriers and of owner-operators. And it interferes with the routes, services and prices of motor carriers — just what Congress meant the FAAAA to prevent.”
What is Assembly Bill 5?
California Assembly Bill 5, or AB 5, is a state statute that expands a landmark Supreme Court of California case from 2018, Dynamex Operations West, Inc. v. Superior Court ("Dynamex"). In that case, the court held that most wage-earning workers are employees and ought to be classified as such, and that the burden of proof for classifying individuals as independent contractors belongs to the hiring entity. AB 5 extends that decision to all workers.
Trade organizations representing motor carriers and independent owner-operators oppose the new law, which aims to reclassify large numbers of independent contractors as company employees.
CTA believes it is “reasonably likely” that the Supreme Court will agree to hear the case and ultimately reverse the April decision by a three-judge panel of the 9th Circuit.
“For decades, motor carriers across the United States have provided freight-transportation services through owner-operators — individuals who drive their own trucks and operate as independent contractors,” CTA said in its petition. “Owner-operators play a critical role in interstate commerce — one that Congress has recognized and protected.”
CTA said its petition for review centers on an “express conflict in the federal circuit courts on an exceptionally important question of federal law: Does the Federal Aviation Administration Authorization Act of 1994 preclude states from adopting worker-classification rules that prohibit or substantially restrict motor carriers’ use of owner-operators?”
CTA FILES PETITION FOR WRIT OF CERTIORARI WITH THE UNITED STATES SUPREME COURT https://t.co/C0F0q30WGx pic.twitter.com/xEoX5vwa3B — CA Trucking Assoc. (@Caltrux) August 9, 2021
CTA said that question warrants review for several reasons:
- The courts of appeals and state courts of last resort disagree about the answer.
- The decision upholding California’s statute is wrong. “Congress used notably broad pre-emptive language in the FAAAA to avoid development of a patchwork of state service-determining laws, acting to ensure that trucking rates, routes and services would reflect competitive market forces,” CTA said.
- The issue is one of tremendous practical significance. “If applied to owner-operators, California’s worker-classification statute will upend the trucking industry’s long-standing business model,” CTA said. “It also will destroy the uniformity necessary for the free flow of interstate commerce and the operation of nationwide businesses.”
CTA said that, for decades, classification of California workers as independent contractors or employees had been governed by the “multifactor test” described in the case S.G. Borello & Sons Inc. v. Department of Industrial Relations.
“Motor carriers lawfully treat owner-operators as independent contractors under that test,” CTA told the Supreme Court. “In 2018, however, the California Supreme Court held that a new test for independent-contractor status, the so-called ‘ABC’ test, would apply to claims under state wage orders. … The California Legislature subsequently adopted a statute, known as Assembly Bill 5, that codified the ABC test, expanded its applicability beyond wage orders to reach the entire Labor Code and the Unemployment Insurance Code, and created specified exceptions to the test.”
CTA filed its federal lawsuit against the California attorney general Oct. 25, 2018, citing the regulations as violating federal pre-emption. On Jan. 16, 2020, it was granted a preliminary injunction against enforcing the law.
In his order, Judge Roger Benitez of the Southern District Court of California said, “There is little question that the state of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking.”
The 9th Circuit is permitting the district court’s injunction to still stand until CTA has exhausted its legal appeals.
California lawmakers passed AB 5 in September 2019 to codify a 2018 state Supreme Court decision that made it easier for independent contractors to become reclassified as employees of motor carriers. The bill was signed into law Sept. 18 by Democratic Gov. Gavin Newsom, who had publicly voiced his support for the legislation. The law was slated to go into effect in January 2020.
“In California, more than 70,000 owner-operators choose to work independently because of the freedom, flexibility and business growth potential that business model provides,” CTA’s CEO Shawn Yadon, said in statement. “These small-business entrepreneurs face irreparable damage should AB 5 be allowed to exist as it relates to the trucking industry.”
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