Justices should Decide Whether to take the Case Any Day

There is one shot left for California truckers to stop the state’s AB 5 law, as the California Trucking Association appealed in August to Supreme Court as it promised when it lost an full Appeals Court decision in June.

The CTA has a strong case, due to a 1994 law creatig federal pre-emption of transportation law, passed to avoid the impossibility of truckers needing to comply with individual rules by state.

Supply Chain Digest Says...   A huge question for the trucking industry – and by extension shippers – is what happens if the Court refuses to take up the case, or rules against CTA? Could California's anti-contractor law move quickly to other states? What do you say? Click here to send us your comments   Click here to see reader feedback

The history: In 2018, the California Supreme Court handed down a ruling which set up a very tough "ABC" test for when a worker can be considered a contract employee.

That test consists of the following:

Part A of the test requires that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

Part B of the test requires that the worker performs work is outside the usual course of the hiring entity's business; and

Part C of the test requires that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

In addition, the contractor must actually be in business for themselves.

This is a high bar indeed for an employee to be considered a legitimate contractor, especially Part B. It is estimated that there are some 70,000 contract or independent drivers in the Golden State that would be forced to become employees or leave the state.

Concerned that a court ruling alone could be too easily overturned or tough to enforce, in 2019 the California legislature passed what is termed AB 5, a new law which codified the Supreme Court ABC rules.

That law was set to go into effect Jan. 1, 2020, but there was a variety of legal action, including a federal suit by the CTA to stop enforcement of the law, under the federal pre-emption principle, among other claims.

AB 5 ensnares all kinds of people, from freelance writers to Uber and Lyft drivers, though the state later did a cleanup bill to exempt some professions.

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But not rideshare drivers. So both Uber and Lyft threatened they might have to pull operations out of the state if they were forced to comply.

Not wanting to lose their precious ride sharing access, in November 2020 California voters overwhelmingly passed a ballot measure to exempt Uber, Lyft and other rideshare companies from AB 5, though the measure did force some modest worker benefit requirements that had to be given to the still freelance drivers.

As for the CTA suit, a district court ruling held that CTA had standing and was likely to succeed on the merits of its claim. It therefore enjoined the state from enforcing AB 5 against any motor carriers doing business in California. Then the California attorney general and the International Brotherhood of Teamsters appealed the district court ruling to the 9th Circuit.

And a three-judge panel on the 9th Circuit Court, known for its liberal rulings for decades, said in April that the district court abused its discretion by enjoining the state of California from enforcing AB 5 against motor carriers doing business in California, saying the measure is "generally applicable labor law that affects a motor carrier's relationship with its workforce and does not bind, compel or otherwise freeze into place the prices, routes or services of motor carriers, and is not pre-empted by" federal law.

Then in June, the full court rejected another appeal by CTA.

So, it’s off to the Supreme Court for CTA- if the justices agree to take the case. Note: There was an erroneous report in the media two weeks ago that the Court had rejected the case, but that turned out to have been another petition.

“For decades, motor carriers across the United States have provided freight-transportation services through owner-operators - individuals who drive their own trucks and operate as independent contractors,” CTA said in its petition. “Owner-operators play a critical role in interstate commerce - one that Congress has recognized and protected.”

CTA added that the key issue is that it appears there is an “express conflict in the federal circuit courts on an exceptionally important question of federal law: Does the Federal Aviation Administration Authorization Act of 1994 preclude states from adopting worker-classification rules that prohibit or substantially restrict motor carriers’ use of owner-operators?”

A huge question for the trucking industry – and by extension shippers – is what happens if the Court refuses to take up the case, or rules against CTA? Could California's anti-contractor law move quickly to other states?

If so, the independent trucker may become an endangered species – with the irony of course being that most independent owner-operators AB 5 is meant to “protect” choose that lifecycle because they want it, as most could easily get a job as an employee at almost any carrier of their choosing.

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