Welcome
Daily Labor Report®

California Classification Law Blocked for Truck Drivers (2)

Jan. 16, 2020, 8:59 PMUpdated: Jan. 16, 2020, 11:05 PM

The roughly 70,000 truckers who operate as contractors in California won’t be bound by a new worker classification law while their lawsuit to block the measure moves forward, a San Diego federal judge said Thursday.

The temporary restraining order in place will be extended in the trucking industry’s challenge to the new California law that makes it harder for employers to classify workers as contractors. This represents the latest win for the industry in its fight to kill the measure they say will lose companies business.

A.B. 5, which went into effect Jan. 1, codified and expanded a 2018 California Supreme Court ruling that created the so-called “ABC” test. The standard presumes workers are employees and outlines three strict criteria employers must meet to classify their workers as contractors. A federal judge previously granted a temporary restraining order to the trucking industry.

Granting the preliminary injunction blocks the law’s application to the trucking industry for the duration of the case, until the judge decides whether a permanent injunction is warranted.

Industry groups representing freelance journalists and gig companies Uber Technologies Inc. and Postmates Inc. have filed their own lawsuits to block enforcement of the law. Uber and others are also promoting a ballot initiative that would give voters a chance to nix the state law entirely.

Truckers’ in Unique Position

The trucking association, which has fought this test and sought a carveout from the onset, has a distinct argument from the other industry groups. The California Trucking Association sued to block enforcement and said that the new law made it “impractical if not impossible” for motor carriers to contract with owner-operators to provide trucking services while treating drivers as employees. They argue the ABC test clashes with the Federal Aviation Administration Authorization Act, which preempts certain state regulations for the industry.

Federal Judge Roger Benitez agreed. The ABC test has more than a “tenuous, remote, or peripheral” impact on motor carriers’ prices, routes, or services and therefore the association could succeed in its lawsuit that argues for preemption under federal law, the U.S. District Court for the Southern District of California judge said in granting a preliminary injunction request.

“With its decision, the U.S. Southern District Court validates our claim that the implementation of the new classification test could have been detrimental to the long-standing and historical place owner-operators have had in the transportation industry,” Robert Roginson, the association’s attorney, said in a statement.

The International Brotherhood of Teamsters intervened in this case and argued for the law to be upheld. Stacey Leyton, attorney with Altshuler Berzon, who represents the union said, “We are disappointed in the decision, which we believe is contrary to law and deprives workers of the clarity and protection that AB5’s test offers. We are confident that, when and if this goes up on appeal, the decision will be overturned.”

The California attorney general’s office said it is reviewing the decision. “Our office has and will continue to defend laws that are designed to protect workers and ensure fair labor and business practices,” it said.

Long Litigation Road Ahead

On January 8, 2020, the Los Angeles Superior Court ruled that because the ABC test effectively prohibits motor carriers from using independent contractors to provide transportation services, the test has a significant, impermissible effect on motor carriers’ “prices, routes, and services,” and thus, is preempted by the FAAAA.

Both the federal and Los Angeles cases are expected to wind their way through the court systems, respectively. That is likely to give California’s highest court and the federal appellate branch opportunities to weigh in on the central legal question: whether requiring trucking companies to make drivers employees would interfere with motor carriers’ prices, routes, or services in a way that’s preempted under federal law.

It would be an issue of first impression in the U.S. Court of Appeals for the Ninth Circuit, Benitez said, but he suggested California case law favors an argument for federal preemption for truckers. The Seventh and Third Circuits previously dismissed such arguments by the trucking industry. The First Circuit ruled in 2016, however, that federal law preempted part of a worker classification test in Massachusetts.

Contracting out the driver’s role allows companies to shift the cost of truck ownership and operation to individual truck drivers, according to a report from Labor Center at the University of California, Berkeley. The report said these drivers have long been incorrectly classified as contractors, and have been burdened with the capital costs of operating trucks, which cost as much as $120,000, and keeping up with strict regulatory standards imposed in the state.

The California Trucking Association is represented by attorneys with Ogletree, Deakins, Nash, Smoak & Stewart. The California Justice Department is defending the state.

The case is Calif. Trucking Ass’n v. Becerra, S.D. Cal., 3:18-cv-02458, 1/16/20.

(Adds comment from California attorney general's office in 10th paragraph.)

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.