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California Truckers Escape New Worker Status Test, For Now

Jan. 1, 2020, 1:20 PM

California truckers won’t fall under the state’s worker-friendly test to determine who’s an employee, for now, after a federal judge placed a temporary halt to enforcement against the industry.

The temporary restraining order prevents the state from enforcing its new worker classification law, AB5, against the motor carrier industry.

The California Trucking Association has fought for a carve-out from the law and its “ABC test” that presumes workers are employees unless an employer can establish that workers meet the three prongs of the test. The association argued that the industry is exempt under federal law that governs drivers who engage in interstate commerce. It said the new law “imperils the livelihoods of the independent owner-operators, the thousands of small business owners who operate their own trucks and who contract with motor carriers to transport property.”

Judge Roger T. Benitez of the U.S. District Court for the Southern District of California agreed, saying in his Dec. 31 order that the association has shown that AB5’s application to the trucking industry is likely preempted by the Federal Aviation Administration Authorization Act of 1994, because the state law “effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are.” The judge also rejected a request by the Los Angeles City Attorney to file a brief opposing the temporary restraining order.

The court will hold a hearing Jan. 13 to determine if a longer-term preliminary injunction should be put in place to block the application of AB5 against motor carriers in the state. The law itself took effect on Jan. 1, 2020.

Other sectors, including gig economy companies like Uber and Postmates, also have challenged the law, which could force them to reclassify their workers as employees who are entitled to minimum wages, overtime, and other employment benefits.

Fighting Standard Since 2018

The trucking association has been fighting the ABC test since the California Supreme Court created the new standard in a 2018 ruling called Dynamex Operations West v. Superior Court.

The association refiled its claim once AB5 was passed into law in fall 2019, codifying that decision.

The law’s ABC test replaced a more flexible test and lays out three specific criteria employers must meet to classify their workers as contractors: Companies must show A) that the workers have freedom from control over how to perform the services provided; B) that the services are outside the business’s normal variety of work; and C) that the workers are engaged in an independently established role.

The ABC test replaced a standard that also was challenged by the trucking industry, known as the Borello test, which weighed various factors to determine a worker’s classification.

Courts thus far have issued mixed rulings in response to requests from the trucking industry to restore the previous standard, at least where it might contradict with federal law. The U.S. Supreme Court on March 18 declined a request by the California Trucking Association to take up the issue under the Borello standard. The U.S. Courts of Appeals for the Seventh and Third Circuits previously have dismissed such arguments by the trucking industry. Yet the First Circuit ruled in 2016 that part of a worker classification test in Massachusetts was preempted by federal law.

The California attorney general has argued that the challenge doesn’t warrant a temporary restraining order because the trucking association lacks standing, and can’t establish irreparable harm or proof that it’ll succeed in its claims. The plaintiffs rely solely on “speculative and foundationless assertions about the predicted impact” of the law to support their claims, the state said.

Additionally, the plaintiffs can’t prevail on their claims, the state argued. A.B. 5 is a law of general application that’s not federally preempted, it said. The ABC test doesn’t discriminate against or substantially burden interstate commerce because it applies equally to in-state, multi-state, and out-of-state employers and doesn’t impose any requirements on trucking routes or how they’re staffed, the state said.

Ogletree Deakins Nash Smoak & Stewart PC represents the plaintiffs. The California Department of Justice represents the government.

The case is Calif. Trucking Ass’n v. Becerra, S.D. Cal., No. 18-cv-02458, order 12/31/19.

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

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Terence Hyland at thyland@bloomberglaw.com

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