• DTS.USA
    5.829
    -0.005
    -0.1%
  • NTI.USA
    2.860
    0.010
    0.4%
  • NTID.USA
    2.820
    -0.040
    -1.4%
  • NTIDL.USA
    1.930
    -0.030
    -1.5%
  • OTRI.USA
    7.990
    0.040
    0.5%
  • OTVI.USA
    12,810.370
    100.000
    0.8%
  • DTS.USA
    5.829
    -0.005
    -0.1%
  • NTI.USA
    2.860
    0.010
    0.4%
  • NTID.USA
    2.820
    -0.040
    -1.4%
  • NTIDL.USA
    1.930
    -0.030
    -1.5%
  • OTRI.USA
    7.990
    0.040
    0.5%
  • OTVI.USA
    12,810.370
    100.000
    0.8%
Driver issuesLegal issuesNewsTrucking

Breaking: federal judge temporarily blocks AB5 enforcement against California trucking (with video)

A federal judge has handed down a temporary restraining order blocking the Jan. 1 implementation of California’s AB5 against motor carriers.

AB5 is the law restricting the ability of independent operators — including truck drivers — to operate in the state.

In a case brought by the California Trucking Association, Judge Roger T. Benitez of the U.S. Southern District Court ordered the state not to enforce AB5 against any motor carrier in California, pending a final resolution of the lawsuit brought by the CTA.

Weston LaBar, the executive director of the Harbor Trucking Association, which is closely aligned with CTA, described it as a “minor victory” but said he hoped it was one step toward “a more fruitful” victory in the CTA’s fight against AB5. While the CTA is the lead plaintiff, LeBar said the Harbor Trucking Association, which represents the drayage sector, supported CTA’s efforts and believed it was the preferred organization to lead the legal fight.

At issue in the judge’s order was the so-called “B Prong” of AB5. AB5 adopted almost verbatim wording from the Dynamex case handed down in California in 2018 which set several tests for when a worker should be considered an employee rather than an independent operator. The B part of the ABC test in Dynamex — the basis for the B prong in AB 5 — said an owner-operator should be considered an employee unless, as Benitez noted, “the person performs work that is outside the usual course of the hiring entity’s business.” A trucking company hiring a truck driver who is independent would not meet that test of independence. A trucking company hiring a cleaning company to tend to its headquarters would meet it.

Key legal arguments against AB5 have focused on the Federal Aviation Administration Authorization Act of 1994. That federal law has wording on the ability of states to regulate motor carriers. Attorneys for CTA have argued that FAAAA pre-empts AB5, and Benitez was persuaded.

In a footnote, the judge said “the Court is persuaded by the likelihood of Plaintiffs’ success on the FAAAA preemption ground.” Benitez chose not to address some other CTA arguments; in essence, he appears to be saying that the FAAAA challenge is enough and other legal points don’t need to be considered at this time.

In another part of his ruling, Benitez said the CTA and other plaintiffs “are likely to succeed on the merits.” He also ruled that a restraining order is called for because the plaintiffs are “likely to suffer irreparable harm in the absence of relief” and “relief is in the public interest.”

The ruling suggests that a truck driver would almost never be found to be an independent owner-operator under the tenets of AB5. “Because contrary to Prong B, drivers perform work within (court italics) the usual course of the motor carrier hiring entity’s business, drivers will never be considered independent contractors under California law,” Benitez wrote.

And the costs of ignoring the law are significant, he added. “If their interpretation of the statute is correct, Plaintiffs will have to risk criminal prosecution or take significant and costly compliance measures,” he wrote.

LaBar called the temporary restraining order a “really good sign.” “It is extremely difficult to get a restraining order and preliminary injunction,” he said. “This bodes well for the case.”

“We felt like this was an overreach from day one,” LaBar added. “We felt like this was done with a complete disregard on how this impacted interstate commerce.”

He added that he hopes the decision and a possible success in further proceedings can “attract cargo back to the West Coast, giving us boxes to move and livelihoods to make.”

LaBar said the next hearing on the case will be Jan. 13.

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.

13 Comments

  1. A lot of the mischief setting into the industry reminds me of those crony regulation days? We worked our way around that bs too. Can’t be for hire if it’s your freight… just transporting It and selling it to the customer. That was a way around things years ago. we gotta figure out a way around this insurance crisis. Obama care had everyone up in arms but government mandated car insurance. Not a peep. And costs have only increased! oh it’s because of all the new safety technology is expensive to repair. Cahoots!

    Next up is ohh we need to fast track autonomous regulations because we’ve driven out all workers.. aka driver shortage. Imagine insurance cost on unproven autonomous? Only the self insured can be early adopters.

    Bottom line is the judge bought us some time two weeks. But we can’t just keep reacting.. there is a lot we have control of. That’s gotta be the focus. 2020 the year of the American trucker! Hitting the jakes on cor·rup·tion

  2. The problem is leased operators do not have the protection and incorporate drivers as well Certain states and provinces have to bring legislation to protect the truck drivers because the current model of many trucking companies leaves the taxpayer with the costs. The government in Ontario Canada is now having truck drivers arrested if are injured like was with both feet damaged and no to leave the hospital when I was being treated as a outpatient with daily I V treatment’s this happened to me Saturday morning 31 hours after being dropped off in front of the mission on the street only able to crawl . I had no wheelchair or walker I’m think summer coveralls I’m a tempature below 0 I am still very sick.. Lucky I able to get access to a wheelchair van Sunday from a nonprofit organization until get better which I living in as I am too sick to admitted back into a shelter.

  3. Most big trucking companies don’t want the head ache and are taking the position in advance. I don’t think this little pause will help anyone except the companies that weren’t planing on complying already.

  4. Simply put in my 44 years in USA observing how the Federal and States Governments including local so called government administrative bodies is the whole system is becoming a real and true DICTATIRSIP system hiding behind a smoke screen they call Sovereignty etc.

  5. I think this law is for employers who own equipment, hire an employee, and then 1099 then to circumvent workmans comp, benefits, FICA, etc. The problem with this law as it relates to carriers with owner/operators is the conflict between DOT, IRS and insurance companies. According to the IRS, an owner/operator who is leased onto a carrier has to show he is able to work for whomever he wants and whenever he wants, free from control, to establish “independent contractor” status. The DOT says a carrier is responsible and liable for the actions relating to safety (CSA) for the contractor who is leased to them, Colorado has a statement “Motor Carrier Responsible for Safety” followed by the carrier’s DOT number on their IRP cab cards. DOT also requires proof of Cargo and Liability insurance which most times the carrier has to provide, and I know my insurance company WILL NOT allow any of my owner/operators to pull for another entity or do what they want while leased to me under my authority and insurance.

    1. Even personal conveyance puts most companies at odds with the law. Technically if I own my truck I should be able to drive it anytime anywhere on personal conveyance as long as I’m not under a load. There is no dot rule saying how much a driver can use a day. So if a company tells you what you can and can’t do with your own equipment they just crossed that imaginary line. That’s why companies are getting rid of California drivers.

  6. That judge is IGNORANT !

    Quote:

    “In a footnote, the judge said “the Court is persuaded by the likelihood of Plaintiffs’ success on the FAAAA preemption ground.” ”

    ROTFLMAO !!!

    WAKE UP JUDGE !

    That silly temporary restraining order should be easily overturned !

    In my humble opinion !

    There’s jurisprudence on the matter !

    BOOYAH !

    Quote:

    Third Circuit Finds FAAAA Does Not Preempt New Jersey ABC Test
    February 6, 2019

    In Bedoya v. American Eagle Express Inc., the Third Circuit Court of Appeals held that the Federal Aviation Authorization Administration Act of 1994 (FAAAA) does not preempt New Jersey’s wage and hour laws, permitting delivery drivers to continue with a suit claiming they were misclassified as independent contractors. As a result of this decision, motor carriers located in states within the Third Circuit (Delaware, New Jersey and Pennsylvania) will need to ensure their relationships with drivers classified as independent contractors satisfy the so-called “ABC” test.

    Background
    Delivery drivers for a logistics company, American Eagle Express (AEX), brought a putative class action in New Jersey federal court, alleging that they had been misclassified as independent contractors rather than employees in violation of New Jersey’s wage and hour laws. Under the New Jersey ABC test utilized by the New Jersey Wage and Hour Law and the New Jersey Wage Payment Law, a worker performing a service for a company is properly classified as an independent contractor only where the company can establish all of the following:

    The individual has been and will continue to be free from control or direction over the performance of  the service, both under contract of service and in fact; and
    The service is either outside the usual course of the business for which such service is performed, or such service is performed outside of all the places of business of the enterprise for which such service is performed; and
    The individual is customarily engaged in an independently established trade, occupation, profession, or business.

    FAAAA Preemption
    AEX moved for judgment on the pleadings, claiming that the ABC test is expressly preempted by the FAAAA, and therefore does not determine the employment status of their delivery drivers. The district court denied the motion.  In considering AEX’s appeal, the Third Circuit found that a presumption against preemption applies because wage laws fall under states’ police power, which can only be superseded by a federal act where that was the “clear and manifest purpose” of Congress.  The court then addressed whether the presumption against preemption is overcome by such a purpose indicated by Congress when enacting the FAAAA.

    The court recognized that the FAAAA was enacted as a result of a 15-year congressional effort to deregulate the air travel and interstate trucking industries.  To ensure that state laws would not interfere with that purpose, Congress expressly provided in the statute that “a State . . . 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 . . . with respect to the transportation of property,” with limited exceptions.  Examining congressional intent and Supreme Court jurisprudence, the court noted that while state laws need only be “related to” a motor carrier’s prices, routes, or services to be preempted by the FAAAA, preemption is not “an endless exercise.”  To be preempted, the state law’s impact on prices, routes, or services must be “direct” and “significant.”  To interpret those words, the court looked to the relevant precedent and the text of the FAAAA itself and, in doing so, formulated non-exhaustive lists of factors courts should consider in assessing whether a law’s directness and significance result in preemption. 

    To evaluate a state law’s directness, courts should examine whether it:
    mentions a carrier’s prices, routes, or services;
    specifically targets carriers as opposed to all businesses; and
    addresses the carrier-customer relationship rather than non-customer-carrier relationships (e.g., carrier-employee).
    To evaluate significance, courts should examine whether: 
    the law binds a carrier to provide or not provide a particular price, route, or service;
    the carrier has various avenues to comply with the law;
    the law creates a patchwork of regulation that erects barriers to entry, imposes tariffs, or restricts the goods a carrier is permitted to transport; and
    the law exists in one of the jurisdictions Congress has determined lacked laws that regulate intrastate prices, routes, or services and thus, by implication, is a law Congress found not to interfere with the FAAAA’s deregulatory goal.

    Third Circuit’s Analysis
    Applying those factors, the court held that New Jersey’s ABC test was not preempted by the FAAAA. 

    AEX argued that applying New Jersey’s ABC test may require it to shift its business model away from using independent contractors, which would increase its costs, and in turn, its prices, by forcing it to hire employees.

    The Third Circuit found that New Jersey’s ABC test does not prevent trucking companies from hiring independent contractors, but rather determines whether drivers are properly classified as independent contractors.

    More specifically, the court noted that any effect the test has on prices, routes, or services is tenuous because it mentions neither them nor carriers.. It only seeks to regulate the relationship between companies and their “resource inputs,” (i.e., workers), as opposed to their “product outputs” (i.e., goods and services). 

    The court also found that the ABC test’s impact on motor carriers’ prices, routes, or services was insignificant, highlighting that the test does not bind carriers to a particular method of providing services. 

    The court explained that even if the test may require carriers like AEX to shift their model away from using independent contractors, which may increase costs, such financial consequences “do[] not equate to a significant impact on Congress’ goal of deregulation.” 

    The court also pointed to the similarity between New Jersey’s employment status test and those of other states as support for finding no preemption. The court concluded that state wage and hour laws are not the kind of pre-existing state regulations that Congress was concerned about when it passed the FAAAA.

    The Bedoya decision will ensure that motor carriers in the Third Circuit continue to face legal challenges when classifying drivers as independent contractors. In light of the court’s pronouncements, carriers should review their relationships with their drivers and other service providers for compliance with the ABC test.  ”

    End quote !

  7. FURTHERMORE !

    Quote :

    California Supreme Court Adopts “ABC” Test for Independent Contractor Status in Wage-Hour Cases
    by D. Gregory Valenza | May 1, 2018

    Happy May Day, comrades. Yesterday, the California Supreme Court unanimously adopted the “ABC” test for independent contractor status in wage-hour law cases.  That test has been around a while, but it’s new to California jurisprudence.

     The headline is that it will be nearly impossible for employers to classify individual service providers as independent contractors, except in narrow circumstances. What’s the ABC test?  Why does it strongly favor employee status? You ask a lot of questions. OK, read on.

    First, a little background. The dispute arose in the context of a delivery company called Dynamex Operations West, Inc., and a class of its delivery drivers.  The drivers owned their own trucks, had a degree of autonomy in their daily activities, and were parties to independent contractor agreements. But they performed the very services Dynamex sold to its customers – delivery of packages, etc.  

    The trial court certified a class of some of those drivers as allegedly mis-classified independent contractors.  In doing so, the trial court applied a definition of “employment” found in the California Industrial Welfare Commission Wage Orders that cover nearly all employees in California.  

    One of the definitions in the Wage Orders is an “employee” is someone that an employer “suffers or permits to work.”  

    Basically, that means an employee is anyone the employer allows to perform work for the employer, but the employer had the power to stop it.

     It is a very broad definition.  The trial court in essence found that if the drivers could prove they met the definition of employee in the Wage Orders, they could prevail in their mis-classification suit  on a class-wide basis, and recover wages and penalties that employees are afforded, but contractors are not (such as overtime, minimum wage, meal and rest period premiums, etc.)  

    Dynamex had argued that the trial court should not apply that expansive definition of employee contained in the Wage Orders.  (Wage Order 9 applied to Dynamex, but that doesn’t matter because the “employee” definition is consistent among all 17 Wage Orders).

    Rather, Dynamex argued that the proper analysis for determining independent contractor status is contained in the California Supreme Court’s multi-factor test for independent contractors that it announced in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.

    With that background, the issue the Supreme Court set out to decide was whether the independent contractor relationship must be established through Borello’s analysis of many factors, or may the plaintiff win if s/he can prove that s/he was a covered “employee” under one of the three definitions contained in the Wage Orders.  

    The unanimous opinion, authored by the Chief Justice, goes on for 85 pages.  There’s lots of historical analysis, comparison of different independent contractor tests, etc.  And that all led to the following:

    First, the Court decided that in wage-hour cases alleging violations of provisions contained in Wage Orders, it is not necessary for employees to prove they are employees rather than contractors under the Borello test.  

    Rather, employees can establish they are employees by using the definition of employment in the Wage Orders.

    As the Court previously explained in Martinez v. Combs (2010) 49 Cal.4th 35, the Wage Orders’ definition of employee is:
    “[t]o employ . . . under the [wage order], has three alternative definitions.

    It means: (a) to exercise control over the wages, hours, or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” 

    On the other hand, there’s no definition of “independent contractor” in the Wage Orders.

    So, if any of the above-quoted definitions applies, you’re not an independent contractor. You’re an employee.  

    If you’re “employ”ed under the Wage Order, and not “exempt” from the Wage Order, you’re entitled to all the goodness the Wage Order confers on employees, even if you might be an independent contractor in other contexts (such as for workers’ compensation purposes).  

    The first prong is the traditional “necessary control” test, under which the hiring entity is in control of the manner and means of the work, and the worker cannot be an “independent” contractor.  The third prong of that test in Martinez is equivalent to the Borello standard.  

    The Court here was concerned with the second part of the definition quoted above, I.e., what it means to “suffer or permit to work” in the context of independent contractors. 

    The trial court applied this definition without any limitations, such that if you called a plumber from Roto-Rooter to your business and the plumber performs work, the plumber might be considered your employee (along with the Roto-Rooter business).  

    The Supreme Court realized that the definition of “suffer or permit” should not be that broad. The Court recognized that a business will have true “independent contractors” who might qualify under the “literal” definition of “suffer or permit to work.” 

    So, after much discussion and analysis that I read so you don’t have to, the Court settled on what is referred to as the ABC test, variations of which are used in other jurisdictions.

    The Court decided that the “employer” / business / hiring entity has the burden of proving each of the following to establish an independent contractor relationship under the Wage Order:
    a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. 

    Because the employer must prove all three elements, if any one of them fails, the Wage Order applies. 

    Factor “A” is the most fact-intensive standard, and is part of the normal “control” analysis that is applied in independent contractor cases, as quoted above from Martinez v. Combs.

    The employer has to show that the contractor decides the “methods and means” of accomplishing the work. Factor A also makes it important to have a written contract, spelling out the contractor’s independence.

    The Court did not go into whether Dynamex satisfied Factor A here, because it held that the plaintiffs could prevail by defeating Factors B OR C, or both.

    Factor B means that there is no way to hire a contractor that performs the same services that the business sells to its customers.  Here’s how the Court explained it:

    Workers whose roles are most clearly comparable to those of employees include individuals whose services are provided within the usual course of the business of the entity for which the work is performed and thus who would ordinarily be viewed by others as working in the hiring entity’s business and not as working, instead, in the worker’s own independent business. 

    Thus, on the one hand, when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having suffered or permitted the plumber or electrician to provide services to it as an employee. (See, e.g., Enforcing Fair Labor Standards, supra, 46 UCLA L.Rev. at p. 1159.)

    On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will thereafter be sold by the company (cf., e.g., Silent Woman, Ltd., supra, 585 F.Supp. at pp. 450-452; accord Whitaker House Co-op, supra, 366 U.S. 28), or when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes (cf., e.g,, Dole v. Snell (10th Cir. 1989) 875 F.2d 802, 811), the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees.
    * * * * 
    Treating all workers whose services are provided within the usual course of the hiring entity’s business as employees is important to ensure that those workers who need and want the fundamental protections afforded by the wage order do not lose those protections.

    If the wage order’s obligations could be avoided for workers who provide services in a role comparable to employees but who are willing to forgo the wage order’s protections, other workers who provide similar services and are intended to be protected under the suffer or permit to work standard would frequently find themselves displaced by those willing to decline such coverage. 

    With respect to Factor C, here is what the Court said:
    the term “independent contractor,” when applied to an individual worker, ordinarily has been understood to refer to an individual who independently has made the decision to go into business for himself or herself. (See, e.g., Borello, supra, 48 Cal.3d at p. 354 [describing independent contractor as a worker who “has independently chosen the burdens and benefits of self-employment”].)

    Such an individual generally takes the usual steps to establish and promote his or her independent business — for example, through incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like.

    When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor by the unilateral action of a hiring entity, there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification.

    A company that labels as independent contractors a class of workers who are not engaged in an independently established business in order to enable the company to obtain the economic advantages that flow from avoiding the financial obligations that a wage order imposes on employers unquestionably violates the fundamental purposes of the wage order. 

    Of great importance, to pass muster under Factor C, the contractor must actually be in business for him/herself. It is not sufficient that the contractor agreement merely allows the contractor to work for competitors: 

    The fact that a company has not prohibited or prevented a worker from engaging in such a business is not sufficient to establish that the worker has independently made the decision to go into business for himself or herself.

    As you can probably see, Factors B and C likely mean the end of using the “independent contractor” agreement as a substitute for hiring a temp, or for “trying out” a an employee such as a manager.

     If employees normally perform the work, or if an outsider would expect the hiring entity to perform the work with its own employees, no contractor relationship will fly.

     Similarly, under Factor C, if the contractor doesn’t already have an established business, and engages in a “one-off” contract with the hiring entity, that will not satisfy the requirement. 

    The Court expressly limited its holding and endorsement of the ABC test to “claims that derive directly from the obligations imposed by the wage order.”  

    The Wage Order contains provisions such as overtime, meals and breaks, suitable seating, etc.

    But the Wage Order does not include other types of claims, such as expense reimbursement, paid sick leave, wage statements, and other Labor Code provisions.

    Therefore, employers must satisfy the ABC test and other legal standards (such as the Borello test) for independent contractor status. 
     
    There are some independent contractor relationships that are established by law.

    For example, doctors are not employees of hospitals, even though they provide the services that the hospital provides.  So, there may be some exceptions to the ABC test when other laws establish independent contractor relationships. 
     
    Outside salespersons are generally exempt from the Wage Order.

     Will they be evaluated as independent contractors under the ABC Test, or under a different analysis?

     Similarly, what about “exempt” professionals like lawyers or CPAs.  Can they be independent contractors even though they fail part of the ABC analysis (such as Factor B)? Stay tuned.  ”

    End quote !

    .