The Ninth Circuit Court of Appeals ruled that Assembly Bill 5 was not preempted by federal laws governing the trucking industry, and reversed a lower court ruling, as it ordered freight carriers to begin complying with the California employment law.
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, 48 Cal. 3d 341 (1989).
Almost thirty years after Borello, the California Supreme Court revisited the framework for classifying workers as employees or independent contractors for purposes of California’s Industrial Welfare Commission (IWC) Wage Orders.2 See Dynamex Operations W. v. Superior Ct., 4 Cal. 5th 903, 912, 957 (2018). Dynamex adopted a standard commonly referred to as the “ABC” test.
In September 2019, the California legislature enacted AB- 5, which codified the ABC test and expanded its applicability. See Cal. Lab. Code § 2775.
The California Trucking Association, a trade association representing motor carriers that hire independent contractors who own their own trucks, and two independent owner-operators filed suit, seeking to enjoin enforcement of AB-5. It viewed the new rule statutorily classifying a worker as an employee as effectively precluding the business model employed by CTA’s members.
In October 2018, after Dynamex was decided, CTA, along with two independent owner-operators, filed this lawsuit against Xavier Becerra, the Attorney General of California, and others, seeking a declaration that the federal law, the Federal Aviation Administration Authorization Act of 1994 (FAAAA), preempted the ABC test as applied to motor carriers.The district court allowed the International Brotherhood of Teamsters, a labor union that represents owneroperators classified as employees, to intervene.
The federal district court held that CTA was likely to succeed on the merits of its claim. It therefore enjoined the state from enforcing AB-5 against any motor carrier doing business in California. The 9th Circuit Court of Appeals reversed in the published case of California Trucking Association v Bonita.
The Supremacy Clause of the United States Constitution provides that federal law “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the Contrary notwithstanding.”
In Dilts v. Penske Logistics, LLC, 769 F.3d 637, 647 (9th Cir. 2014), the 9th Circuit determined that California’s meal and rest break laws, as applied to motor carriers, are not preempted by the FAAAA. See also Ridgeway, 946 F.3d at 1083-86 (holding that the FAAAA does not preempt a California minimum-wage law that would require Walmart to pay long-haul-truck-drivers minimum wages for layovers in California.
Four years after Dilts, the 9th Circuit concluded that the FAAAA does not preempt the test for classifying California workers as either employees or independent contractors. AB-5 is not significantly related to rates, routes, or services. Therefore, it concluded that the F4A does not preempt AB-5 as applied to motor carriers.