The California Trucking Association (CTA) has filed its request for a new preliminary injunction to block AB5 from the state’s trucking sector — again — using an argument that at times seems more economic than legal: The law won’t work.
CTA’s 32-page brief with the U.S. District Court for the Southern District of California was filed Wednesday. The request for a new injunction against independent contractor law AB5 in trucking was made in front of the same court and judge, Roger Benitez, that handed down a temporary injunction on New Year’s Eve 2019 that later morphed into a temporary injunction in January 2020.
That injunction kept AB5 out of trucking, though it was followed by an appellate court overturning it. That ruling was stayed while the CTA appealed to the U.S. Supreme Court, which denied certiorari — a process to seek review of a lower court decision — and led to AB5 being implemented in the state’s trucking market.
The CTA’s latest injunction request visits familiar territory, which makes sense since it is the same case. The original case was never adjudicated. The only court ruling was the initial injunction, the appellate court overturning that injunction and the Supreme Court denial of certiorari. The legal arguments have not otherwise seen their day in court.
The CTA request, like in the original filing, maintains AB5 is in violation of the Federal Aviation Administration Authorization Act, the so-called “F4A.” Benitez’s initial injunction relied heavily on the argument that AB5 would impact “prices, routes or services.” State action affecting those is prohibited by F4A.
CTA also echoes the request for an injunction filed last month by the Owner-Operator Independent Drivers Association. OOIDA’s argument was focused on its belief that AB5 violates the Dormant Commerce Clause of the U.S. Constitution that restricts state action that can impact interstate commerce. OOIDA is an intervenor in the case on the side of the CTA.
That argument was made in the initial CTA case against AB5, first filed in 2019, but was not part of the injunctions Benitez handed down on either side of New Year’s Day 2020.
The third part of the CTA request is that AB5 should be blocked from state regulation of trucking because of “implied preemption,” along the lines of the F4A question and how much a state can do in regulating activity also governed by extensive federal regulation.
But much of the request for an injunction is spent telling human stories, not as an emotional tug but to argue that AB5 will fail in the state’s trucking sector — and cause concurrent economic harm with an impact on “prices, routes, or services” — because independent drivers have no desire to be employees. AB5 backers have been clear that one of their targets was California trucking, which they want to see as employees become possibly ripe for unionization. In some cases, they have already been successful.
In conjunction with the injunction request, the CTA filed declarations from several individuals, including independent owner-operators who have either left California because of AB5 or are considering it. No matter what legal value these declarations provide, they put a voice to what has mostly been anecdotal evidence so far of drivers departing the state because of the law.
Thomas Odom’s declaration reviews his history: growing up poor in east Los Angeles, little education, minimum-wage jobs. Odom turned to trucking instead.
“I couldn’t believe as a truck driver that I went from making minimum wage to making $37,000 a year,” Odom wrote.
After several years as an employee driver, Odom said he purchased his first trucks and set up Tiger Rock Transportation, receiving his federal motor carrier authority in 1996. He built that company to 10 trucks, but it eventually filed for Chapter 11 bankruptcy protection in 2002. Odom later became a lease operator and drove for Ryder Systems (NYSE: R), so in that role he was considered an independent owner-operator.
AB5 grew out of the Dynamex decision in 2018, which created the ABC test for determining independent contractor status. The B prong of the test — that an independent contractor is considered one who “performs work that is outside the usual course of the hiring entity’s business” — represents the trucking industry’s significant burden in complying with AB5, which was passed and signed into law in 2019, codifying the ABC test.
Most of Odom’s driving for Ryder was from California to El Paso. The Dynamex decision led Ryder to stop contracting with him, Odom said in his filing. A similar outcome awaited him with Landstar (NASDAQ: LSTR), so he detoured into being a dispatcher and then went back on the road as an independent owner-operator.
“With the lifting of the preliminary injunction in the case, I had to make a choice — either become an employee driver or find a way to continue working as an owner-operator,” Odom wrote in his declaration. “I am not willing to become an employee driver.”
That latter statement was submitted in bold for emphasis.
One workaround to AB5 suggested by legal advisers and others is for an independent owner-operator leased to a company and driving under its authority should instead get their own authority and have freight brokered into them. Odom said he looked into that and received quotes for insurance — which would have been covered by the lease company previously — between $22,000 and $32,000.
“In talking to my insurance broker, he told me that the reason my quotes were so high was because of California,” Odom wrote.
In a section that raises questions about whether the brokerage “solution” to AB5 will work, Odom maintains brokers are reluctant to deal with California’s market.
“My best and perhaps only option is to work with freight brokers, who seem to think they have a better chance of satisfying the ABC test,” Odom wrote. “Even freight brokers, however, are avoiding the California market when dealing with California-based owner-operators. Many of the brokers also embargo loads originating in California when using contract drivers — due, I am told — to their fear that California will interpret the ABC test to classify those drivers as their employees if they originate freight shipments in California. If I continued to be based in California, I would have to deadhead to another state.”
So Odom left. He moved to Tennessee, got his authority and now pays $16,000 for insurance.
“But even operating outside of California, there are still major impediments to me running loads into and out of California,” he wrote.