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As discussed previously on this blog, California’s AB5 is set to completely rewrite California’s employment law. With the law taking effect with the start of the new year, California’s trucking industry was facing unprecedented change. However, the California Trucking Association (“CTA”) got a key court victory on December 31, to beat out the countdown to midnight. At least for now.
In California Trucking Association, et al., v. Attorney General Xavier Beccera, the CTA sought an exemption for truck drivers from California’s gig law, as the trucking industry operates largely with truck drivers working as independent contractors. Something that seems unlikely to be allowed should the law be applied to the industry. The CTA argued California’s new law is pre-empted by federal law, namely the Federal Aviation Administration Authorization Act of 1994.
With AB5 about to take effect, the CTA was granted a temporary restraining order by District Court Judge Robert T. Benitez preventing the new law from applying to California’s truck drivers. The CTA’s motion for preliminary injunction is set for January 13, 2020. The granting of the TRO allows the trucking industry to continue its business as usual for now but still leaves an incredible amount of uncertainty heading into the January 13th hearing and beyond.
Truck drivers are also one of many groups seeking exemptions from the new law. Some professions like doctors and lawyers already have exemptions; however, other heavily impacted industries, including freelance writers and photographers are also seeking their own exemption. Unsurprisingly, this all leaves the new law in flux across the state, as we start a new year with a potentially cataclysmic change to how businesses operate in California.
With the pending court filings and AB5 now in effect, California’s employment law, and particularly the trucking industry, is facing incredible uncertainty. In navigating and staying on top of all the changes and their impact on the industry it is important for employers to have experienced employment and transportation lawyers on their side to navigate this new and ever-changing environment.
On January 16, 2020, Judge Benitez issued an order granting Plaintiffs’ Motion for a Preliminary Injunction in CTA v. Beccera. Judge Benitez found that “AB-5’s ABC test has more than a ‘tenuous, remote, or peripheral’ impact on motor carriers’ prices, routes, or services, particularly in light of our Ninth Circuit jurisprudence casting serious doubt on the type of ‘all or nothing rule’ that AB-5 implements. Thus, for the previous reasons, Plaintiffs have carried their burden at this preliminary stage of showing a likelihood of success on the merits as to their FAAAA preemption challenge.” The court concluded: “[T]here 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. In so doing, California disregards Congress’ intent to deregulate interstate trucking, instead adopting a law that produces the patchwork of state regulations Congress sought to prevent. With AB-5, California runs off the road and into the preemption ditch of the FAAAA.” The court then enjoined defendant Becerra and various other named state administrators from enforcing AB 5’s ABC test as set out in in Cal. Labor Code § 27503.(a)(1) as to any motor carrier operating in California. The order is attached to this Notice as Exhibit “B.”
Also of note, on January 8, 2020, the Honorable William F. Highberger issued an order granting in part Defendants’ Motion in Limine Re Preemption and Non-Retroactivity of ABC Test in People of the State of California v. Cal Cartage Transportation Express, LLC., et al., Case No. BC689320 (Los Angeles Superior Court). In an enforcement action brought by City of Los Angeles on behalf of the State of California, Judge Highberger held: “the requirements of the ‘ABC’ test set forth in Dynamex Operations West v. Superior Court (2018) 4 Cal.5th 903 (‘Dynamex’) and the recently enacted Assembly Bill 5 (‘AB 5’) clearly run afoul of Congress’s 1994 determination in the Federal Aviation Administration Authorization Act (the ‘FAAAA’), 49 U.S.C.§ 14501(c)(1) that a uniform rule endorsing use of non-employee independent contractors, known in the trucking industry as owner-operators, should apply in all 50 states to increase competition and reduce the cost of trucking services.” Judge Highberger held the FAAAA pre-empted the independent contractor misclassification test set forth in Dynamex and AB 5 and found that the enforcement action must proceed under the standard set forth in Borello.