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Farm, forest product exporters applaud stay of AB 5 truck bill

Agriculture Transportation Coalition says California trucking regulation would “wreak havoc” on exporters of farm and forest products that depend on California ports.

The Agriculture Transportation Coalition (AgTC) cheered the decision by a federal judge to stay the AB 5 law that would make it more difficult for truckers to work as independent owner-operators.

In a case brought by the California Trucking Association (CTA), Judge Roger T. Benitez of the U.S. Southern District Court ordered the state not to enforce AB 5 against any motor carrier in California, pending a final resolution of the lawsuit brought by the CTA.

Had the law gone into effect as scheduled on Jan. 1, it “would have begun to wreak havoc on trucking in California and on the hundreds of thousands employed in U.S. agriculture/forest products exports, directly and indirectly, who depend on California’s export gateways to world markets,” said a statement from Peter Friedmann, the executive director of the AgTC, one of the largest groups representing shippers of farm and forest products.

“Agriculture/forest products are the nation’s largest volume export. Our exporters have struggled to stay competitive during these trade wars, which thankfully appear to be ebbing. But competition is intense and growing. To be competitive in the Asia-Pacific and global marketplaces, our exporters require transport and ports to be affordable and efficient,” he wrote.

Friedmann said that California ports, through which many agriculture products flow, are losing market share and that AB 5 would have increased trucking costs and accelerated that trend, undermining access to foreign markets.

AgTC also said it was concerned that legislatures in New York and New Jersey are considering a similar limitation on independent contracting, which could affect its members’ exports through the Port of New York/New Jersey.

“Federal law must continue to control interstate commerce, and should preempt individual state efforts to dramatically change our trucking laws, causing severe damage to our nation’s export competitiveness,” Friedmann added.


  1. Noble1

    That judge is IGNORANT !

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

    ROTFLMAO !!!


    That silly temporary restraining order should be easily overturned !

    In my humble opinion !

    There’s jurisprudence on the matter !

    BOOYAH !

    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.

    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 !
    End quote !

    1. Noble1

      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 !

      1. Noble1

        Quote: :
        March 2017


        When an employer does not pay an employee for work, the employer is liable for the unpaid wages.  But a company’s owners, directors, officers, and managing agents may be personally liable for wage and hour violations as well.  Lower-level managers and supervisors may also incur personal liability in some circumstances. 

        Labor Code Section 558.1

        Labor Code section 558.1 permits employees to bring certain actions against “persons acting on behalf of [their] employer.”  Employees may assert against these “persons” a variety of wage-hour claims.

        These include Wage Order or Labor Code sections governing timely payment of discharged employees, meal, rest, and recovery periods, itemized wage statements, unpaid minimum wage and overtime, and the reimbursement of employment related expenses.

        “Employer” is defined in the Labor Code  to include “an owner, director, officer, or managing agent of the employer.”  So,  employees may bring wage and hour claims against the owners, directors, officers, or managing agents of the business. 

        A managing agent is an employee who exercises substantial discretionary authority over decisions that ultimately determine a company’s policies.  A manager who merely has authority to hire or fire employees is not a managing agent.

         However, a manager who exercises substantial independent authority and judgment, and whose decisions affect company policies may be. The key issue in making that determination is how much discretion the manager possesses, and whether their decisions ultimately determine corporate policy. 

        Other Employees Who May Be “Employers”

        Labor Code section 558.1 does not apply to lower-level managers and supervisors.  However, those individuals may be liable for certain wage and hour violations under case law and the Wage Orders.  In Martinez v. Combs, the California Supreme Court adopted a broad definition of employer contained in the Wage Orders. 

        Specifically, the court held that “[to employ] means:  (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit work, or (c) to engage, thereby creating a common law employment relationship.”   As a result, “employer” can include a broader set of defendants than the “corporation” or other business entity, such as a subsidiary.  

        Misdemeanor Liability

        The Labor Commissioner can seek to impose criminal liability on an employer, including an owner, director, or managing agent, for failing to comply with a “stop order.”  A “stop order” is an administrative order to cease work due to serious wage and hour violations.  Individuals can be charged with a misdemeanor punishable by imprisonment in county jail for up to 60 days and/or by a fine of up to $10,000.   

        Personal Liability under Federal Law

        The federal Fair Labor Standards Act (FLSA) also allows for corporate agents and certain employees to be held personally liable for minimum wage, overtime pay, and child labor violations.  Federal courts will apply an “economic realities” test, which requires the individual to exercise significant control over the company’s operations. 

        To make this determination, courts consider whether the individuals have the power to hire and fire employees, determine salaries, are responsible for maintaining employment records, and control other significant aspects of the company’s day-to-day functions.   

        In Boucher v. Shaw the Ninth Circuit ruled that a CEO, CFO, and other managers could be held liable for the corporation’s failure to pay wages under the FLSA because the officers had “control and custody of the plaintiff class, their employment, and their place of employment.”  However, in Alvarez Perez v. Danford-Orlando Kennel Club, Inc., the Eleventh Circuit found a corporate officer who was only at the actual workplace once a year was not an “employer” under the FLSA. 

        Employer Required to Indemnify

        Although laws allow for an individual employee’s personal liability under federal and state law, California managers rarely will pay out of pocket for wage and hour violations.

        California law requires employers to indemnify employees for necessarily incurred expenses, which can include legal expenses generated by claims against the individual. Indemnification is required when an employee is working within the course and scope of employment, carrying out the employer’s directions. 

        So, when a manager carries out company policy, the employer is responsible for reimbursing that manager for legal costs and even a judgment.

        That said, management risks liability when they take actions that are outside the course of employment. And indemnification may not be possible if the employer is insolvent or otherwise unable to pay.

        Bankruptcy/Insolvency of Employer

        Laws expanding liability allow plaintiffs to recover awards from those who may be able to pay when the business entity-employer is insolvent or undercapitalized.  For example, if an employer files for bankruptcy, an employee may try to recover their unpaid wages from alternative sources, such as managing agents. Although employers are required to indemnify employees, managers and supervisors may have to seek indemnification in the bankruptcy proceedings. 


        So-called “sue your boss” laws provide tangible incentives for managers to ensure the employing entity complies with all the relevant minimum wage, overtime, and other salary and benefit laws. 

        Those who implement wage and hour policies should seek training regarding the complex web of wage and hour obligations. These would-be “employers” also should review their employing entities’ by-laws and insurance policies to determine if owners, directors, officers, and managing agents are appropriately protected and if additional coverage is needed.  

        Employing entities also must foster a workplace environment that prioritizes compliance with employment law, which includes policy development and management training.”
        End quote !


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Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.