On June 30, 2022, the final day of its term, the U.S. Supreme Court denied review of two challenges to California’s Assembly Bill 5, which codified a worker classification test that generally prevents truck drivers from being classified as independent contractors. The decision to deny review lifts a temporary injunction that paused AB 5 from applying to truck drivers while pending approval for review by the Supreme Court.
AB 5, signed into law in September 2019, adopted the “ABC Test” established by the California Supreme Court in the 2018 Dynamex Operations West, Inc. v. Superior Court case for determining whether a worker can be classified as an independent contractor rather than an employee. Under the ABC test, a worker is an employee rather than an independent contractor unless all of the following factors are met: (A) the person 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; (B) the person performs work that is outside the usual course of the hiring entity’s business; and (C) the person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The trucking industry has long classified drivers as independent contractors on the basis of being owner-operators. However, the enactment of AB 5 prohibited the practice since truck drivers working for a trucking company fail the “B” prong of the test, as they are not performing work outside the usual business of the hiring entity.
The trucking industry immediately challenged the law as being preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA) with respect to trucking operations in interstate commerce. In January 2020, a U.S. District Court agreed that the FAAAA preempts any state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property” and granted the trucking industry a temporary injunction preventing enforcement of AB 5 against independent owner-operator truck drivers in California Trucking Association, et al. v. Becerra. However, on April 28, 2021, the Ninth Circuit lifted the injunction and ruled that AB 5 was not preempted by the FAAAA as it was a “generally applicable labor law that impacts the relationship between the motor carrier and its workforce, and does not bind, compel, or otherwise freeze into place a particular price, route, or service of a motor carrier.”
Although the decision of the Ninth Circuit lifted the temporary injunction, it was stayed pending appeal to the U.S. Supreme Court. Now that the Supreme Court has denied review of the Ninth Circuit’s ruling that AB 5 applies to the trucking industry, trucking companies will be required to follow the ABC test when classifying drivers.
Employers Council can help members ensure they are correctly classifying their workers. Members in the trucking industry or who use independent contractors in any industry in California can contact the California Legal Services team at CAInfo@employerscouncil.org.
#California#IndependentContractors#StateWageLaws