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Driver issuesNewsTruckingTrucking Regulation

AB5 injunction gets its next day in court on January 13, with plaintiffs confident

The next step in sorting out the legal impact of a New Year’s Eve surprise takes place Jan. 13 in a San Diego courtroom.

It is on that day when Federal District Court Judge Roger Benitez will hear arguments whether to turn his temporary injunction blocking trucking industry enforcement of California’s AB5 independent contractor legislation into a preliminary injunction. 

The case that led to the New Year’s Eve temporary injunction was brought by the California Trucking Association (CTA). But there are plenty of other interested parties looking to ride on CTA’s coattails. 

In discussions with various attorneys connected to the case who asked not to be identified, the sentiment among the trucking industry is optimistic that the temporary injunction will be turned into a preliminary injunction that will hold through the legal proceedings to determine if California’s AB5 can apply against the trucking industry or whether it is preempted by a federal law, the Federal Aviation Administration Authorization Act (FAAAA) of 1994. There is language in that legislation, known as F4A, that the CTA argues would prohibit applying a state law like AB5 to the transportation industry.

The trucking industry is heartened by some of the language Judge Benitez used in handing down the temporary injunction. “At this early stage of the proceedings and within the brief amount of time available, plaintiffs have carried their burden for purposes of emergency relief to show … that they are likely to succeed on the merits,” he wrote in the order for the temporary injunction. 

Separately, in a footnote that actually denied considering a separate CTA argument on the so-called “dormant commerce clause,” Benitez wrote that “because the court is persuaded by the likelihood of plaintiffs’ success on the FAAAA preemption ground, it declines to address plaintiffs’ alternative challenges to AB5.” In other words, probable victory on the FAAAA preemption argument makes it unnecessary to pursue other legal arguments.

The argument and fear of the trucking industry all along has been the so-called “B prong,” used in the Dynamex civil case that was the precursor of AB5. In the Dynamex decision, to show that an employee is a truly independent contractor and not an employee, an employer needed to show that the worker is engaged in an activity that is not the business’ usual pursuit. A trucking company hiring an accounting firm to do financial work would pass the B prong test but a trucking company hiring an independent trucker to haul freight presumably would not. 

“Because contrary to Prong B, drivers perform work within ‘the usual course of the [motor carrier] hiring entity’s business,’ drivers will never be considered independent contractors under California law,” Benitez wrote in summing up the argument. 

The wording in the Dynamex decision, handed down early in 2018, was copied almost verbatim by the authors of AB5. The bill sailed through both houses of the California legislature — the Assembly first, which is why it is called AB — and signed by Gov. Gavin Newsom.

The CTA case is not litigating the specifics of AB5. It is focused solely on what the plaintiffs see as a conflict with the FAAAA. The wording in the FAAAA is fairly clear: “A state, political subdivision of a state or political authority of two or more states may not enact or enforce a law, regulation or other provision having the force and effect of law related to a price, route or service of any motor carrier.” It is that provision that the CTA says makes AB5 an illegal reach by the California government.

As one attorney said of the temporary injunction, “we are likely to win the lawsuit and so the court stopped the law from going into effect.”

AB5 remains an enormous issue in California. An entire swath of employees are protesting that their livelihoods have been upended, from freelance writers to Uber and Lyft drivers. When word started getting out New Year’s Eve that there had been an injunction against AB5, the Twitterverse exploded under the #AB5 hashtag, only to be hit with disappointment when people learned it applied solely to the trucking industry.

Joe Rajkovacz, the director of governmental affairs and communications for the Western States Trucking Association, said people in the trucking industry “were expending great sums of money to kind of reconfigure their operations.” But the New Year’s Eve injunction “got people pausing, wondering now what do we do?”

One strategy several companies had pursued is that they were requiring owner-operators to change from being sole proprietors to becoming S corporations. An S corporation, according to the Internal Revenue Service description, is one with less than 100 shareholders “that elect(s) to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes.” 

An S corporation allows a driver to be paid via a process that does not generate a 1099 IRS form. It is that form, Rajkovacz said, that can be interpreted by regulators as a possible sign of misclassification of an employee as an independent contractor. 

One point that has been made by several people is that even if AB5 is pushed out of the trucking industry, the precedents set by the Dynamex decision remain. But there is also a feeling that Dynamex, which now operates as TForce Final Mile, simply went too far in 2004 in reclassifying its workers as independent contractors, the action that set off the legal process that ended with the 2018 decision.

Secondly, a finding by Benitez in favor of the CTA may make judges hearing trucking-related cases brought under the Dynamex decision consider whether they have jurisdiction. Such a decision by Benitez — and possibly some judges along the appeals process — might impact litigation brought under the precedents set in the Dynamex case.

Another possibility for the dispute is that the legislation could be amended to create a carve-out for trucking. Assemblywoman Lorena Gonzalez, who wrote the legislation (with a great deal of verbatim lifting of wording from the Dynamex decision), has hinted that there may be more carve-outs for particular industries, as there are in the original legislation. But she also has not sounded particularly conciliatory while engaging in some nasty Twitter battles with her critics

Additionally, one of the defendants in the CTA case, along with California Attorney General Xavier Becerra, is the Teamsters, who might be unwilling to end this fight to keep AB5 from impacting the trucking industry.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.

4 Comments

  1. Quote:
    “The Supreme Court Holds that the Test for Preemption of State Laws is Not the “Form” of the Law but its “Effect.”

    What is the “effect” of the ELD mandate on rates, routes and services ?

  2. What is the main purpose of the Federal Motor Carrier Safety Administration (FMCSA) ?

    Quote:
    “The Federal Motor Carrier Safety Administration (FMCSA) is an agency in the United States Department of Transportation that regulates the trucking industry in the United States. The primary mission of the FMCSA is to reduce crashes, injuries and fatalities involving large trucks and buses. ”

    How well has that been working ?

    The FMCSA is a regulatory agency, in a deregulated industry, which has supposedly been created to improve “safety” in the trucking industry by regulating it .

    How about The Department of Transportation (DOT)

    “The DOT’s mission statement claims that an “efficient and modern transportation system ” to “improve the quality of life for all Americans” is their goal”

    How well has that been working ?

    On one side we have the Airline & Trucking transportation industry through the FAAAA that wants to be preempted from anything remotely affecting price, routes, and services which is impossible in the “broad” sense and highly unreasonable .

    Then we have these so called ” safety” regulatory agencies who are an absurd representation of “safety” , and through which are affecting price, routes, and services in the trucking industry .

    These are grounds to : 1- Redraft and clarify The Federal Aviation Administration Authorization Act of 1994 & The 49 U.S. Code § 14501.Federal authority over intrastate transportation by removing any potential ambiguity .

    2- Restructure the whole commercial road transportation industry . Deregulation in 1980 has reached a point of complete chaos .

    Just to mention a few absurdities :
    Misclassifications tying up the courts . Driver abuse and exploitation . Major Carrier Associations lobbying government in an attempt to manipulate government into favouring their desires at the expense of others(major conflict of interest) etc etc etc . This is beyond ridiculous and all at the tax payers and drivers expense .

    Regulations shouldn’t cause chaos . Regulations should mitigate and prevent chaos .

    They tried deregulating commercial road transportation , it hasn’t functioned . Furthermore , the regulators within the industry are causing chaos due to a lack of proper coordination .

    IMHO

  3. Unions and trucking firms in legal battle over owner-driver status in California

    Quote:

    “The CTA has mounted a lawsuit against AB5, arguing that the law is “unconstitutional”, being in direct conflict with the Federal Motor Carriers Safety Act and the Federal Aviation Administration Authorisation Act of 1994. It contends that independent contractors are essential for carriers to meet fluctuating demand.  

    However, the Teamsters labour union, which has fought protracted legal battles with FedEx over worker classification, disagrees: “It’s clear that this is a case of greedy corporations pulling all stops to avoid complying with the law,” said Joint Council 7 president and international vice-president Rome Aloise.  

    The union has also turned its fire on the CTA lawsuit, claiming drivers have been chronically underpaid as independent contractors. ”

    End quote

    QUOTE :
    December 2 2019
    Teamsters Local 455 Members in Denver Ratify Contract at Sysco

    “Members of Teamsters Local 455 in Denver ratified their strongest contract ever on Friday, Nov. 29, on day 11 of a strike that shut down the company’s food service operations throughout Colorado.

    The five-year agreement includes improvements in wages, health, welfare and pension benefits; includes recognition for and folds in 18 new maintenance members; protects members and provides strong, concrete protections for drivers as Sysco attempts to implement driver production requirements throughout its operations.

    The unit of 339 warehouse workers and drivers along with the maintenance workers, returned to work on November 29.”

    REQUOTE :

    “Members of Teamsters Local 455 in Denver ratified their strongest contract ever on Friday, Nov. 29” !

  4. December 23 2019
    Houston Sysco Workers Ratify Five-Year Contract

    Quote:

    HOUSTON) – After 10 months of negotiations, Sysco drivers and warehouse workers voted to ratify a new five-year contract by an over 4-1 margin on Thursday, December 19.  This ended a period of six months that they continued diligently working even after their previous contract expired in June. 

    The new contract for workers in the home city for Sysco headquarters contains many improvements, including a well-deserved pay increase in the first year for their hard work (9 percent for drivers and 6 percent for warehouse workers). The agreement also ensures that the workers would continue to receive their average pay should they choose to use their earned vacation time.
    “I’ve been with Sysco for 37 years and I’m glad that we finally got fairer vacation pay, which we’ve been fighting to get for years,” said Anthony Prejean, a Sysco warehouse worker.

    Over the course of the prolonged negotiations, the Sysco workers and Local 988 business representatives stood strong to get management to resolve numerous safety issues.  

    Of the ratification, Robert Mele, President of Teamsters Local 988, said, “We’re proud of the Teamster members and leaders at Sysco who were able to earn respect on the job and obtain the best contract possible.  We’ve worked hard to ensure that our Sysco brothers and sisters have strong representation and workplace protections through better contracts.”

    Brian Ealy, a driver for Sysco said of the contract, “Local 988 represented us well.  This was the first time they negotiated for us, and this is the best contract we’ve ever had.”
    End quote .

    REQUOTE !
    “Brian Ealy, a driver for Sysco said of the contract, “Local 988 represented us well.  This was the first time they negotiated for us, and this is the best contract we’ve ever had.”

    REQUOTE :

    “this is the best contract we’ve ever had”

    HALLELUJAH !
    Check out Jeff Gutts on X Factor 2013 sing it !!!

    Google it : Hallelujah by Jeff Gutt

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