Federal Judge Denies CTA Challenge to California AB 5

Judge Says Independent Contractor Law Does Not Run Afoul of Federal Statute
Trucks in California
Trucks on the road in Oakland, Calif. (Justin Sullivan/Getty Images via Bloomberg News)

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A federal district court has delivered a setback to the California Trucking Association as the group continues efforts to block the state’s enforcement of a controversial law that aims to reclassify independent contractors as motor carrier employees.

On March 15, the U.S. District Court for the Southern District of California denied CTA’s request for a new temporary injunction that would block California from enforcing the so-called AB 5 law. The group previously had won an injunction to block it.

In its legal filings CTA has claimed that the law’s three-pronged “ABC” test for worker status determination cannot be enforced against the trucking industry. The B-prong requires that the individual is customarily engaged in an independently established business. CTA has argued that AB 5 will force owner-operators to become motor carrier employees.

In this latest challenge, CTA renewed its claim that AB 5 was, in fact, pre-empted by a federal deregulatory statute. But the district court held that an implied pre-emption claim was unproven. This renewed request came after a federal appellate court rejected CTA’s earlier attempt to stop enforcement of AB 5, and the U.S. Supreme Court’s denial to hear the case.

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.

“Judge Roger Benitez of the U.S. District Court of the Southern District of California ruled against CTA and the Owner-Operator Independent Drivers Association on our combined renewed motion for preliminary injunction and merits trial,” CTA said in a statement after the ruling. “Unfortunately, Judge Benitez ruled against CTA and OOIDA on multiple claims, including a narrower [pre-emption] claim, dormant commerce clause and equal protection. We will be discussing remaining options moving forward with counsel and supporters of the litigation.”

Benitez in his ruling said the law does not run afoul of federal statute.

“In the end, AB 5 does not offend the core constitutional principle of prohibiting purposeful discrimination against interstate commerce,” he wrote. “And while AB 5 has economic effects, the effects do not confirm purposeful discrimination against interstate commerce in the design of AB 5.”

He also rejected CTA’s claims regarding carrier control over drivers. “Plaintiffs’ contention seems to be an argument that if a motor carrier must exercise exclusive possession and control of a leased truck, then by implication, it must also exercise exclusive control over the owner-operator who may drive the truck. It is not at all clear that AB 5 treats interstate owner-operators in an irrational manner.”

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According to CTA, truckers feel differently. “As shown by declarations, recent protests at the ports and surveys, owner-operators want the freedom to operate their own businesses,” it wrote.

“The state defendants have never articulated how a motor carrier can possibly satisfy the statute, including the ‘Prong B’ of the ABC test, and they remain intent on enforcing [the law] against motor carriers,” CTA’s legal brief continued. “They thus continue to threaten irrevocable harm to plaintiffs and the owner-operators who have built businesses in reliance on federal law.”

The court disagreed. “While the jury is out as to whether AB 5 substantially affects carrier prices, routes or services, it does not attempt to do so directly,” it said.