On the eve of California’s new worker classification law, Assembly Bill 5 (“AB-5”), becoming into effect on January 1, 2020, a temporary restraining order was issued, preventing California from enforcing it against truck drivers.
Judge Roger T. Benitez of the U.S. District Court for the Southern District of California issued the order on December 31, 2019, granting the motion by the California Trucking Association (“CTA”).
AB-5, which took effect on January 1, 2020, codified a 3-part test, commonly known as the “ABC” test, to establish independent contractor status as set forth in the seminal case, Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903. As applied to motor carriers, the ABC test provides that an owner-operator is considered an employee unless the motor carrier establishes all of the following:
(A) 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.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
CTA’s motion argued that the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) preempts the application of the AB-5’s ABC test – specifically elements B and C. Under the FAAAA, states are prohibited from “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The CTA argued that applying element B to truck drivers would preclude drivers from ever being considered independent contractors under California law since drivers always performs work within the “usual course” of the motor carrier’s business. In opposition, the California Attorney General, representing the state, argued that AB-5 is not preempted as it does not discrimen
ate against or substantially burden interstate commerce because it applies equally to all, whether inter-state or intra-state, and does not impose any requirements on trucking routes or how they are staffed.
In his ruling, Hon. Benitez agreed with the CTA, holding that “AB-5’s Prong B is likely preempted by the FAAAA because AB-5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are.”
The Court will hold a hearing on January 13, 2020 on CTA’s request for a preliminary injunction.