Federal standards or state's rights? Making sense of Denham and Dynamex

  (Photo: Shutterstock)

(Photo: Shutterstock)

The trucking industry has operated for several months now under the shadow of two fundamental issues regarding federal standards versus state standards, which equates to carriers protecting themselves from frivolous tort on the one hand, and independent truckers protecting their pay and rights on the other. Both issues have emerged in 2018 from the heavyweight state of California.

First, there is the issue of the Denham-Cuellar-Costa Amendment (as it’s officially called), backed by Reps. Jeff Denham, R-CA, Henry Cuellar, D-TX, and Jim Costa, D-CA. The bill has garnered an unsurprising mixed reaction from the trucking industry. House Minority Leader Nancy Pelosi sent out a letter asking her fellow Democrats in the House to oppose the amendment, saying it would erode “a key safeguard against fatigue, crashes and vehicular deaths.” Pelosi’s letter also characterized the amendment as “a handout to special interests and big corporations who have lobbied for its passage” such as the American Trucking Associations.

The amendment passed by a vote of 222-193, with 12 Republicans joining 181 Democrats in opposition. After passing the House in late April, the bill awaits reconciliation with the Senate version.

The American Trucking Associations (ATA) believes the amendment will help streamline interstate commerce by federalizing HOS rules, but the Owner-Operator Independent Drivers Association (OOIDA) believes the amendment will deprive truck drivers of needed rest breaks and rightful pay for those breaks.

As if things weren’t complicated enough as they pertain to the Denham Amendment, the industry is also sorting through the even more recent Dynamex ruling by the California Supreme Court. The long and short of the Dynamex decision is that the court used altogether different criteria for its test of what defines an independent contractor, and without providing much clarity as to the implications (five paragraphs of the 86-page ruling). Rather than continuing to operate under the Borello test, the precedent-setting ruling that the state has operated under for the past 30 years, the state will now define what a contractor is under an A-B-C test, as FreightWaves has previously covered.

As recently as July 19, the Western States Trucking Association (WSTA) filed a petition with the USDOT asking it to intervene in the dispute over California’s breaks requirement. WSTA filed a lawsuit challenging a recent California Supreme Court ruling regarding owner-operator status. WSTA represents trucking companies in 11 states, including California. The two issues at hand, however, affect all carriers who operate in California, no matter where they’re based, and this is one primary source of the issue at hand. The petition asks the USDOT to rule on a narrow point, upon which the strategy is to build from there. They ask that the federal hours of service (HOS) regulations supersede California’s break requirement laws only for oversize and overweight loads.

Joe Rajkovacz, head of government affairs for WSTA, has also said the lawsuit seeks “to nullify the Supreme Court ruling that effectively eliminates the use of owner-operators, even one-truck motor carriers from the trucking marketplace.”

“What I see is $300,000 shakedowns by lawyers who get a hold of one of our members who has 15 trucks, and they end up paying that to make this go away,” he said.

The 2014 decision ruled that carriers must comply with state laws that require employers to provide meal breaks and paid rest breaks to employees—an issue currently isolated to California, but if it remains, other states may very well follow. The ruling has created a wave of lawsuits.

Opponents also include the Teamsters Union. The Denham Amendment would “overrule court precedents confirming that truck drivers are entitled to basic workplace protections,” said the Teamsters in a press release, after the recent passage in the House.

Allen Smith, a “truck driver advocate” who runs the website AskTheTrucker, has pushed hard to get drivers to stop the amendment. Smith says he reached out to “experts in the field of Employment Law,” to analyze the claims made by the ATA. He takes issue with them point by point, but overall he is concerned with the issue of drivers not receiving pay for breaks. He writes:

“The rest breaks allowed by California law of 10 minutes every 4 hours are paid breaks, and Washington has a similar law. Under federal DOT law, the breaks are not paid. So Denham hurts drivers by eliminating pay for rest periods…The Courts and State Legislatures believe drivers and other piece-rate workers should be paid for all hours worked and that was the primary reason for enactment of Labor Code 226.2 and the rest period laws. In California, drivers can get one hour of pay for each day that a meal or rest period is not provided. This premium pay is ignored by the industry in its analysis.”

The OOIDA is also against the current amendment. “We oppose the amendment currently proposed for the FAA bill,” spokesperson, Norita Taylor, tells FreightWaves. “It is written too vaguely and would block future efforts to expand driver pay and ensure truckers are fairly compensated for all the time they work.”

The ATA argues that it would be impossible for carriers to comply with varying state laws regarding meal and rest breaks, should all states choose to follow California’s path. The group argues the 1994 Federal Aviation Administration Authorization Act (FAAA) states clearly that federal hours of service laws preempt state laws that try to regulate trucking.

David Heller, vice president of government affairs for the Truckload Carriers Association (TCA) has spoken with FreightWaves on the issue before. He argues, “The goal is to make the rules uniform. If every state had different meal and rest break [rules] drivers would have to contend with each state’s rules.”

For instance, a driver moving through three states could theoretically face three different rules. In that case, which rule prevails? Heller has also pointed out that the amendment does not include “piece-rate” language specifically so as not to impact driver pay.

“It is not an effort to cut driver pay whatsoever,” he insists. “It is an effort to get uniform standards and eliminate unnecessary litigation.”

While that may very well prove to be the case, the broad language of the legislation leaves the door open for widespread speculation.

As for the Dynamex decision, many open questions remain. Does Borello apply to 2802 claims? In footnote 5, the court doesn’t address this question. Is the analysis different for business entities, fleets, drivers performing business for their own customers or other carriers and larger trucks?

Does the “exercise control over wages, hours, or working conditions” prong of the precedent-setting Martinez definition from 2010 of “employ” apply outside of joint employment context? Will this test be applied retroactively? The court noted that the language from the wage order on which the test is based dates back to child labor issues.

There are at least 25 different industries in California that have banded together to write a letter to the California Governor, asking him to immediately write legislation to stop the Court’s decision because it is not good news for California businesses. Actions such as these, and the WTSA's attempts are just the latest in a complex array of competing interests in the judicial and legislative arenas.

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