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Latest California AB5-related decision spurs new appeals court arguments

As industry awaits ruling on injunction, latest decision favorable to AB5 is argued in pair of letters

California’s trucking sector moves closer every day to a decision by a federal appellate court whether to maintain the injunction that is preventing AB5 and its ABC test from governing the hiring of independent contractors in the state. 

Of course, that has been said every day since the start of September, when the three-judge panel heard arguments in the case brought by the California Trucking Association (CTA) that since New Year’s Day 2020 has been successful in maintaining that injunction. Lawyers in the case, when asked when the market might get a decision, simply say that they don’t know and that the deliberations have taken longer than expected.

But that doesn’t mean there isn’t anything happening. The latest development is that lawyers for both the CTA and the International Brotherhood of Teamsters are taking a recent state court decision, known as Parada, and are telling the federal judges whether they think it’s significant to the CTA case or whether it shouldn’t matter.

The formal name of the case is Erick Parada et. al. vs. East Coast Transport Inc., with the 2nd District of California’s Court of Appeals handing down the decision April 1. The Parada decision mirrored an earlier case known as Cal Cartage in that both said the Federal Aviation Administration Authorization Act, the so-called F4A, does not preempt the imposition of AB5 in California’s trucking sector. 

Arguments about why F4A preempts AB5 come down to a section of the law that says the rule prohibits any action that could affect prices, routes or services of “any motor carrier.” So far, attorneys for CTA in federal court have argued successfully that AB5 does interfere. The basis for the federal injunction is that F4A does supersede AB5 and that it can’t be invoked in the hiring of independent contractors by California trucking companies. For now, the injunction prevails because federal law trumps state law.

But in dueling letters sent to the three judges post-Parada, the lawyers on each side make their case on the impact of the state ruling on the deliberations of the federal court.

The concern that the lawyers for CTA appear to have is that the appellate court members now have in their possession two cases — the Parada decision and the case involving Cal Cartage — that both say F4A doesn’t conflict with AB5. Miriam Nemetz, an attorney with the Washington office of Mayer Brown, the outside counsel for CTA, seeks to persuade the appellate court in her letter to the federal court that Parada should not be relied upon in reviewing the injunction.

The letter is brief. She cited earlier precedents that say the federal court “is not bound by state court decisions on the preemptive effect of federal law,” citing a case from 1981. The Parada decision “also lacks persuasive value,” she writes, saying it was decided on “minimal briefing.” Nemetz implicitly criticizes the attorneys for East Coast Trucking, the defendant in Parada, by saying that the firm “devoted less than two pages of its brief to preemption.”

In keeping with the idea that the basis for the Parada decision was thin, Nemetz says the court relied only on two cases: the Cal Cartage case and one from 2014, Pac Anchor, that also ruled F4A did not preempt the state’s Unfair Competition Law. Those two cases “effectively require motor carriers to use employee drivers rather than independent contractors,” Nemetz writes.

The central issue in the CTA case that resulted in the current injunction is the California law known as AB5 governing the definition of independent contractors in the state. The law contains the so-called B prong, which on the surface appears to stop hiring people as independent contractors if they perform job duties that are at the heart of the employer’s activities, such as a trucking company hiring an independent owner-operator. 

Not surprisingly, the letter sent by the outside counsel for the Teamsters — which joined then California Attorney General Xavier Becerra as an intervenor in the CTA cases — supports the state decision in Parada and believes that it affirms the idea that F4A does not preempt AB5 in California trucking.

“In Parada, the Court of Appeal held that Assembly Bill 5 … is not preempted by the FAAAA, which is the precise issue before this court in this case,” according to the letter. It is signed by two attorneys for the firm of Altshuler Berzon, Stacey M. Leyton and Andrew Kushner. The letter also cites the Cal Cartage decision. 

It also notes that Parada and Cal Cartage came from two different divisions of the Appellate Court so that it is not essentially the same decision handed down twice.

The attorneys for the Teamsters bring up another issue that is expected to be key in the decision to be handed down by the federal appeals court: whether AB5 is a law of general applicability. Attorneys for the CTA have argued previously that AB5 doesn’t pass this test, in part because it has so many exemptions, either in the original AB5 legislation or in AB2257, which expanded the list of professions getting an exemption even further. 

“Parada held, like Cal Cartage, that AB5 is not preempted because ‘it is a law of general application’ that ‘does not mandate the use of employees for any business or hiring entity,’” the letter says, quoting language in Cal Cartage.

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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.