Pasedena, CAOn November 15, the U.S. Supreme Court asked Solicitor General Elizabeth Prelogar to articulate the position of the federal government with respect to California Trucking Association v. Rob Bonta. The Ninth Circuit decision requires California motor freight carriers to treat drivers as employees, rather than independent contractors. A decision to hear the California labor lawsuit may signal that the Supreme Court is open to limiting the reach of California laws intended to protect California workers rights.
Procedural jockeying
In September 2019, the California Trucking Association and two individuals filed a lawsuit in the District Court for the Southern District of California to prevent California from enforcing A.B. 5. The Association argued that the California law was preempted by the Federal Aviation Administration Authorization Act (FAAAA) because that federal law contains express language prohibiting any state from passing laws that relate to “a price, route, or service of any motor carrier.” In January 2020, the District Court granted the Association’s requested for a preliminary ban on enforcement within the trucking industry. At the time, many observers saw the decision as one of the most important transportation rulings of the year.
The state of California appealed to the Ninth Circuit, where a panel reversed the District Court’s decision, holding that A.B. 5 would not directly affect trucking rates, routes or services, and so the FAAAA did not preempt the law. In June, the Ninth Circuit denied the Association’s petition for rehearing. The Association filed a petition for certiorari with the Supreme Court on August 9.
In general, the Supreme Court takes up only a small percentage of the cases that it is asked to consider. Thus, the fact that it did not deny the petition outright but asked for further briefing on the question of federal preemption suggests a level of interest. Of late, some Court watchers have commented that the Court seems to be less receptive to arguments concerning workers’ rights.
The Ninth Circuit’s decision
Reviewing the context for the challenge to A.B. 5, the Ninth Circuit noted that before 2018, the California Supreme Court’s framework for classifying workers as either employees or independent contractors was set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. As indicia of an employer-employee relationship, the Borello test considers a number of factors, including:
the right to control work;
the right to discharge at will, without cause; and
whether or not the work is a part of the regular business of the principal.
In 2018, in Dynamex Operations W. v. Superior Ct., the California Supreme Court revisited this standard and adopted a significantly different standard commonly referred to as the “ABC” test. Under the infamous Prong B of that test, a worker is presumed to be an employee and may be classified as an independent contractor only if the worker performs work that is outside the usual course of the hiring entity’s business. That is where many independent contractor classifications fail.
In September 2019, the California legislature enacted A.B. 5, which codified the ABC test and expanded its applicability. Under A.B. 5 workers are considered employees, entitled to the wage and hour protections of California labor law unless the hiring entity demonstrates that all of the following conditions are satisfied:
The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
The person performs work that is outside the usual course of the hiring entity’s business; and
The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Industries, like the trucking industry which depend heavily on independent contractors, saw A.B. 5 as an existential threat. Their legal challenges have depended heavily on the provisions of the FAAA.
The FAAA expressly preempts any state law “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” The purpose of the law was, at least in part, to promote competition by deregulating the trucking industry.
In its decision, the Ninth Circuit attempted to “draw a line between laws that are significantly related to rates, routes, or services, even indirectly, and thus are preempted, and those that have only a tenuous, remote, or peripheral connection to rates, routes, or services, and thus are not preempted.” It ultimately concluded that because A.B. 5 is a generally applicable labor law that impacts the relationship between a motor carrier and its workforce, and does not bind, compel, or otherwise freeze into place a particular price, route, or service of a motor carrier at the level of its customers, it is not preempted by the FAAAA.
What next?
For the moment, we wait and watch to see if the Supreme Court will ultimately decide to hear the case. But, partisans on both sides have been mobilizing for months. The Chamber of Commerce, forty-eight state trucking organizations and the Owner-Operator Independent Drivers Association, among others, have filed amicus briefs in support of the position taken by the Association. The International Brotherhood of Teamsters has lined up behind the California Attorney General.
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