The leased owner-operator model in California suffered a severe blow Wednesday as the Ninth Circuit Court of Appeals reversed an injunction that had exempted the trucking industry from state’s AB 5 law and the ABC test for determining validity of any independent contractor classification.
Transportation specialists Scopelitis, Garvin, Light, Hansen and Feary said the California Trucking Association has 14 days to seek rehearing and up to 150 days to appeal with the U.S. Supreme Court. Scopelitis added that the injunction will be lifted either seven days after the expiration of time to request a rehearing or following a denial of a request for rehearing. Or it could be stayed upon further petition of CTA, such as if CTA seeks review by the U.S. Supreme Court.
"Therefore, it is difficult to predict the precise date when the injunction will be lifted and AB 5 can be enforced against motor carriers, although this date could be as early as May 19," Scopelitis said.
Small fleet owner Jimmy Nevarez, who works with more than one owner-operator contractor in addition to hauling himself, remained "curious to see what can be done" in terms of further appeals. He believes the injunction reversal to be "the ugliest thing that could happen to the labor laws in California" when applied to trucking, if it sticks.
The AB 5 law took effect at the beginning of 2020, but a district judge granted CTA an injunction on the grounds that the Federal Aviation Administration Authorization Act of 1994 (F4A or FAAAA) preempted the ABC test’s application to trucking. F4A preempts any state-level laws that would “interfere with prices, routes and services” of motor carriers. The 'B' prong of test is particularly problematic for traditional leasing arrangements with owner-operators classified as independent contractors, given it requires a contractor to be outside the normal course of business of the entity contracted to.
In Wednesday’s ruling the three-judge panel, which voted 2-1 to overturn the injunction, said the district court that issued the injunction “abused its discretion by enjoining the state of California from enforcing AB 5 against motor carriers doing business in California on the ground that such enforcement is preempted by the FAAAA.”
The panel determined that because 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,” it is not preempted by F4A.
