The U.S. solicitor general has recommended that the U.S. Supreme Court not review a case whose outcome would determine whether California’s independent contractor law, AB5, would be implemented in the state’s trucking sector.
The solicitor general’s office said in its brief filed Tuesday that the 9th U.S. Circuit Court of Appeals “correctly determined that petitioners were unlikely to succeed” in their claim that the Federal Aviation Administration Authorization Act (FAAAA) preempts applying the so-called ABC test to owner-operators to determine employee vs. independent contractor status.
The stakes are high: If the court declines to review the appeal by the California Trucking Association, AB5, viewed as having the potential to upend or even obliterate the trucking owner-operator model in the state, will become law in the trucking sector, where it has been blocked previously by a lower court injunction.
The question of whether AB5 would be implemented in California has sat dormant since November. It was at that time that the court asked the solicitor general’s office to weigh in on the 9th Circuit’s action from April 2021 in which it overturned a lower court decision that blocked AB5 from being implemented in the state’s trucking sector. The law is on the books for other companies in the state, albeit with multiple carve-outs for certain industries. Implementation of AB5 for trucking has been stayed while the appeal works its way through the Supreme Court.
It was the CTA that first brought the case that led to the initial lower court’s decision, handed down on New Year’s Eve 2019, blocking AB5 from the state’s trucking industry on the grounds that it was superseded by the FAAAA.
Just how significant the brief is can be debated. Marc Blubaugh, a partner at the Benesch Law Firm and co-chair of its transportation practice, said the court’s interest in the case was always more significant than what the solicitor general’s office was going to say.
“Knowing the administration’s hostility to the independent contractor model, it was highly unlikely that the Solicitor General would file a brief in support of the industry,” Blubaugh said in an email to FreightWaves.
That interest was on the question of FAAAA preemption, as the court requested that the solicitor general weigh in on some other preemption cases as well. “Even the justices who may agree with the Ninth Circuit’s decision may be interested in reviewing the case in order to try to cobble together a majority that addresses the scope of preemption one way or the other,” Blubaugh said.
FAAAA review is at the core of the question before the court
“Although the circuits have reached differing outcomes with respect to FAAAA preemption of the ABC test as codified under the laws of various States, those case-specific decisions do not create a conflict warranting this Court’s review,” the solicitor general wrote. “Moreover, the interlocutory posture of this case and the need to resolve a threshold issue of state law — namely, whether motor carriers and owner-operators may fall within the business-to-business exemption under California law — make this case a poor vehicle in which to address the question presented. Further review is unwarranted.”
The business-to-business exception is a multistep method under which independent contractors can be hired by a company where AB5 would otherwise seem to block such an action.
The ABC test in AB5 is problematic for the state’s trucking sector because of its B prong. The B prong says one test of defining whether a worker is an employee rather than an independent contractor is whether that worker performs an activity that is at the core of the business’ mission. A trucking company hiring a landscaper to take care of the grounds around a headquarters would not meet that test; a trucking company hiring an independent trucker probably would.
FAAAA restricts states from passing legislation that would affect prices, rates or services provided by a motor carrier. It was the lower court’s interpretation of that clause, and the appellate court’s rejection of it, that led to the current standoff.
B2B exception a key part of solicitor general’s reasoning
The summary argument of the solicitor general’s office circled back to the business-to-business exception. Whether owner-operators could continue to drive in California under the exception’s provision “remains a substantial and unresolved question of state law.”
Because of the exception, the solicitor general’s office wrote, “the California statute does not necessarily require motor carriers to hire owner-operators as employees for purposes of state labor law rather than to engage them as independent contractors.”
The brief took on CTA arguments that trucking companies would need to hire truckers on a full-time basis, rather than as owner-operators, thereby having the potential to impact prices, rates or services. “California law does not require motor carriers to hire drivers as full-time employees, and California generally allows piece-rate compensation for part-time or seasonal employees as long as the compensation results in payment of at least a minimum wage, taking into account rest and recovery breaks,” the brief states.
The lower court was correct to describe as “merely speculative” an argument that prices, rates and services would be impacted if AB5 became law in California trucking.
“Petitioners provide no sound basis for this Court to second-guess those factbound determinations,” the solicitor general said.
The brief cites the controversial question of whether drayage operators in the state’s ports are employees, citing California legislature statements that “two-thirds” of drayage drivers are “misclassified as independent contractors when they in fact work as employees under California and federal labor laws.”
Also cited is the landmark Borello case, which previously had been one of the key guidelines to determine whether a worker was independent. The common-law test in Borello, according to the solicitor general, “places great weight on whether the hirer exercises control and direction over the worker. Given those considerations, petitioners have not established that owner-operators necessarily would be properly classified as independent contractors under the common-law test.”
From here, the next steps for the CTA appeal have not changed. The court is free to ignore the solicitor general’s opinion.
If the Supreme Court denies review, the process is complete and AB5 will be implemented in the state’s trucking sector immediately.
But there is no guarantee that the court will make that decision before its summer adjournment, which begins at the end of June. The decision to accept or deny review could spill over into the next court session that begins in October.
If it chooses to review the case, there is no timeline on when the review would be completed.
Prasad Sharma, a partner with the Scopelitis law firm, said there is a history of the Supreme Court taking a case for review even if the solicitor general recommends not doing so. He cited the American Trucking Associations vs. Los Angeles case in 2013, a case also involving FAAAA preemption.
But he added that “anytime the solicitor general recommends denial, it hurts the chances the court will take the case. So it is disappointing.”