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April 25, 2019 12:45 PM, EDT

Two Trucking Associations Challenging ‘ABC’ Contractor Test in Federal Court

Western States Trucking Association challenges "ABC test" The Western States Trucking Association argues the so-called "ABC test" makes it almost impossible for motor carriers to utilize independent contractors. (Getty Images)

An association of small to medium-sized motor carriers has asked the 9th U.S. Circuit Court of Appeals to reject a decision last month by a federal district judge in California to dismiss a challenge to the so-called “ABC test,” which is used to decide if a contractor should be classified as an employee in California.

The legal challenge by the Western States Trucking Association — which claims the ABC test makes it extremely difficult, if not impossible, for motor carriers to use independent contractors — was adopted last year by the California Supreme Court in another case, Dynamex Operations West, Inc. v. Charles Lee et al.

The association filed its notice to appeal the case April 16. The defendants in the case include Andre Schoorl, acting director of the California Department of Industrial Relations, and California Attorney General Xavier Becerra.

California Attorney General Xavier Becerra

Becerra

Western States has argued that the ABC test “forces virtually all independent contractors to become employees to those they choose to contract or work with.” The three-pronged ABC test being challenged 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 B part of the test is what Western States and others say is most difficult for motor carriers to pass.

The ABC test replaces the Borello test, which assessed multiple factors to determine whether an individual was an independent contractor.

Western States has argued in court documents that the ABC test is preempted by the Federal Aviation Administration Authorization Act of 1994, or FAAAA, because it directly impacts the price, routes and services of its motor carrier members. The trade organization also alleges that the test discriminates against out-of-state and interstate trucking companies.

However, in his March 28 ruling, U.S. District Judge Morrison England Jr. agreed with the defendants that the requirements of the wage order “have only a tenuous, remote and peripheral relationship to motor carriers’ rates, routes or services.”

The judge disagreed with Western States’ contention that the ABC test make it impossible to hire independent contractors.

Richard Pianka, deputy general counsel for American Trucking Associations, said that because the case involves a state matter, the California Trucking Association has taken the lead in litigation of the issue. In October, CTA and two independent owner-operators filed a lawsuit in the Southern District of California seeking relief against the test, citing their rights guaranteed by the federal preemption and the Commerce Clause of the U.S. Constitution, which protects the right to engage in interstate commerce free of undue burdens and discrimination by state governments.

Richard Pianka, deputy general counsel for American Trucking Associations

Pianka

“Under the California Supreme Court’s new interpretation of Wage Order No. 9, the motor-carrier members of CTA may no longer operate in California using individual owner-operators to provide trucking services for their customers, unless they also treat such owner-operators as employees entitled to the protections of Wage Order No. 9,” CTA argued in court documents. “It would be impracticable if not impossible for CTA’s motor-carrier members to contract with owner-operators to provide interstate trucking services while treating the drivers as employees under Wage Order No. 9.”

Wage Order No. 9 specifically establishes the rules governing the transportation industry’s minimum wage, overtime, wage statements and meal and rest breaks.

Pianka said ATA is closely following the court challenges in California.

“California is an important state, and we’ve seen these tests crop up elsewhere, and we obviously think they are the wrong approach to these kinds of questions,” Pianka said.

“The independent contractor model and owner-operators have a long and positive history within trucking, and this suit from the CTA seeks to protect that model based on clear federal preemption from the FAAAA,” Shawn Yadon, CEO of CTA, told Transport Topics. “The prospects for the CTA lawsuit challenging the Dynamex ABC Test are very positive, and we are encouraged about where we are at the present time, and look forward to the continuing fight on this vital issue to trucking.”

While the Western States lawsuit is specific to carriers based and operating in California, if the ABC test were applied to other states the case “would obviously have broader ramifications,” said Adam Smedstad, a Seattle-based partner in the law firm of Scopelitis, Garvin, Light, Hanson & Feary, P.C., who has handled numerous similar independent classification cases across the U.S.

Smedstad said two other circuit courts have looked at the ABC test but have reached opposite conclusions.

“It’s difficult to predict how the 9th Circuit may rule in the Western States case,” he told TT.