The U.S. Supreme Court decision not to take up the case of the California Trucking Association v. Bonta lifts the stay of California’s employee classification law and will have immediate impacts on the trucking industry.
The California Trucking Association’s challenge to the law in the Bonta case has failed and sets the stage for California’s AB5 to disqualify many current independent contractor drivers and owner-operators from being classified as independent contractors.
The law was originally aimed at targeting gig drivers for companies such as Uber, Lyft and DoorDash, but it quickly proved broad enough to sweep in independent contractor drivers for motor carriers.
AB5, in short, is the common name for California’s codification of its unforgiving ABC test, which is used to determine whether workers are properly classified as employees or independent contractors. The ABC test, adopted by the California courts first in Dynamex Operations W. v. Superior Court and later expanded and codified by the California Legislature as AB5, presumes that a worker is an employee (and not an independent contractor) unless the hiring entity can prove that the worker:
- (A) Is free from the control and direction of the employer in performing work, both practically and in any contractual agreement.
- (B) Performs work that is outside the usual course of the employer’s business.
- (C) Is usually engaged in an independently established trade, occupation or business of the same nature as the work performed for the employer.
Truckers must show its independent contractors perform work outside of being a motor carrier, which is practically impossible
Many in the industry are fearful (rightfully so) that they will get stuck in the B part of the test — not being able to show that the work of a driver is distinct from the work of the motor carrier that hired them, especially when that driver is running under the motor carrier’s authority.
In the Bonta case, which was originally filed as a challenge to the application of Dynamex to motor carriers and later amended to challenge AB5’s application to motor carriers, the California Trucking Association, on behalf of its independent contractor driver members, argued, first successfully, that the application of AB5 to the transportation industry was preempted by the Federal Aviation Administration Authorization Act, also called the FAAAA.
The FAAAA 49 U.S.C. § 14501(c)(1) says states “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, … broker or freight forwarder with respect to the transportation of property.”
The CTA’s challenge focused largely on the B prong of the ABC test in the context of the widely used and seemingly federally condoned independent contractor model. To avoid the risks of a misclassification suit, a motor carrier, under the B prong, must prove that its independent contractor drivers perform work that is outside the usual course of the motor carrier’s business — a seemingly impossible task in the context of drivers and motor carriers.
AB5 will be ‘highly impactful and disruptive’
Finding that the application of AB5 to motor carriers impacted their prices, routes and services in an impermissible way, the District Court for the Southern District of California, on Jan. 16, 2020, found AB5 preempted by the FAAAA and enjoined its application, leaving the independent contractor model unaffected — at the time.
The state of California appealed the lower court’s injunction to the 9th Circuit Court of Appeals, which, on April 28, 2021, reversed. It found, among other things, that the application of AB5 to motor carriers did not impact the prices, routes or services of motor carriers enough to fall within the preemptive scope of the FAAAA.
The reversal cleared the road for AB5 to take effect, but the 9th Circuit, on June 23, 2021, stayed the effect of its reversal pending the resolution of the CTA’s appeal to the U.S. Supreme Court.
This winding history leads us back to Thursday, when the Supreme Court, without comment, declined to review the Bonta case, leaving the 9th Circuit’s decision intact and clearing the way for AB5 to apply to motor carriers operating in California. The stay previously issued by the 9th Circuit directs that its mandate will take effect immediately upon the denial of certiorari by the Supreme Court.
In its briefing before the Supreme Court, the state of California went to great lengths to downplay the impact AB5 will have on motor carriers and transportation at large, but the consequences have a significant chance of being highly impactful and disruptive to motor carriers operating in California.
It stands to reason that additional legal challenges to AB5 and the ABC test are likely to be made, but for now it looks like motor carriers in California will no longer be spared from the impact of AB5.