The 9th U.S. Circuit Court of Appeals ruled 2-1 on Wednesday that truckers would no longer be exempt from the state’s AB 5 worker classification law, forcing many to become employees rather than independent contractors.
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In September 2019, California passed Assembly Bill 5, a then-bill that set to limit independent contractors, confirm union representation rights, and ensure employee rights to full-time employees. The new law would also drastically increase the number of employees due to the strict ABC test that essentially made all workers employees unless 3 certain factors were met.
Trucking was one of the first industries to go out against the law. In the lead up to AB 5 becoming law on January 1, 2020, driver leasing companies saw a huge spike in business from places that couldn’t retain drivers who were employees. Most companies relied on truckers for flexibility and picking and choosing when certain things were shipped as well, with many fearing a trucking crunch in the state.
However, shortly after AB 5 became law, truckers became exempt thanks to a Los Angeles County Superior Court ruling that found AB 5 covering truckers was unconstitutional. Specifically, it found that the 1994 Federal Aviation Administration Authorization Act (FAAAA) said that states are prohibited from enforcing laws that give “a price, route or service of a motor carrier with respect to the transportation of property.” Effectively, it gave independent truckers the right to operate in every state to both make uniform federal laws possible for easy interstate commerce and to create fair competition.
The trucker exemption sparked a revolt by many industries to fight against being included in AB 5. This culminate in AB 5’s flagship industry that needed to receive the new employee rules, rideshare drivers, being exempt via a statewide proposition in November.
However, despite the law crumbling in other industries, the trucker exemption was brought to the appellate court by the California attorney general and the International Brotherhood of Teamsters, who argued that they should be covered under AB 5.
Despite oral arguments being presented back in September 2020, multiple factors delayed the decision from coming out until Wednesday.
In their ruling, the Appellate Court found that AB 5 was applicable to truckers, and that the FAAAA did not block them from being covered under the new law.
During oral arguments in September, the California Trucking Association (CTA) argued against truckers falling under AB 5, even using the words of AB 5 author, Assemblywoman Lorena Gonzalez (D-San Diego), against it.
“It contains numerous exceptions for numerous industries and professions categorically and contains other exceptions for other industries and professions that are conditionally available,” noted CTA lawyer Andrew Tauber last year. “It actually specifically targets the trucking industry.
“[Gonzalez] says AB5 was designed to eliminate what she characterized as the ‘outdated’ model whereby motor carriers use independent owner-operators to deliver services to their customers. So it simply can’t be maintained on the record that this was a law of general applicability.”
Court rules 2-1 in favor of AB 5
However, Appellate Judges Sandra S. Ikuta and Douglas P. Woodlock didn’t agree, finding that the FAAAA simply didn’t cover truckers due to not being related to rates, routes, or other associated services.
“AB 5 is a 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,” said the judges in their decision on Wednesday. “Therefore, we conclude that the FAAAA does not preempt AB 5 as applied to motor carriers.”
Judge Mark J. Bennett dissented, reiterating that he found that the truckers should not be covered by AB 5.
“I do not agree that a law like AB5 – which affects motor carriers’ relationships with their workers and significantly impacts the services motor carriers are able to provide to their customers – is not related to motor carriers’ services and thus is not preempted. AB 5 both affects motor carriers’ relationship with their workers and significantly impacts the services motor carriers are able to provide to their customers, and it therefore is pre-empted as applied to California Trucking Association’s members.
“The California Trucking Association’s members will now suffer irreparable injury.”
While many labor activists and labor groups cheered the decision on Wednesday and Thursday, the Trucking Association said that it would continue to fight the ruling and to fight the ruling from being enforced.
“We continue to stand by our initial claim that the implementation of AB 5’s classification test is pre-empted by federal law and is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the transportation industry,” said CTA CEO Shawn Yadon on Wednesday. “The California Trucking Association will take any and all legal steps necessary to continue this fight on behalf of independent owner-operators and motor carriers operating in California.”
Many truckers also reacted negatively to the news.
“This is going to hurt us so much,” said Roberto Fox, an independent trucker from Southern California, to the Globe. “AB 5 is going to make everything uniform and non-flexible, especially in terms of hours and what trucks we drive. We need truckers now more than ever, especially with gas stations expecting to run out of gas this summer due to a shortage of truckers.”
“This is all very bad, and I don’t see how anyone can even think this helps us or anyone really.”
The CTA is currently deciding whether or not to appeal the decision. If appealed, it would likely be heard by the circuit court en banc, meaning all judges on the court would hear the case.