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Truck Driver Independent Contractor

California Ban on Trucking Contractors Is Back

May 7, 2021
Appeals court panel says interstate haulers are not exempt from AB 5 law.

Interstate truckers could soon come under California’s highly restrictive independent contractor law because of a recent federal appeals court decision.

A three-judge panel for the U.S. Ninth Circuit Court of Appeals voted 2-1 that a federal law called the Federal Aviation Administration Authorization Act (FAAAA) does not preclude application of the state’s AB 5 contractor law to trucking companies operating in interstate commerce.

In early 2020, before the new law went into effect, a federal district court judge granted an injunction barring the state from enforcing it against interstate truckers while the court heard the case they were making that federal law pre-empted the state statute. Because of the Ninth Circuit action, parties on the other side are expected to ask the district court to vacate the stay, although that had not yet happened at the time this was written.

Trucking interests are expected to appeal the three-judge decision to the full Ninth Circuit, and if the court chooses to uphold it, to the U.S. Supreme Court. The issues arising from how to define and apply the FAAAA to freight transportation have inspired skirmishes, pitched legal battles and seeming last stands over interpretations of the law’s somewhat imprecise language and uneven application.

The nub of the controversy stems from the AB 5 law’s three-part criteria for determining who can be defined as an independent contractor and who must be considered an employee for legal purposes. The “ABC test,” as it has been termed, consists of three criteria, all of which must be present if the person is to be considered a contractor:

• 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.

• The person performs work that is outside the usual course of the hiring entity’s business.

• The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

As you can see, the second criterion would be devastating to the trucking industry, which since its founding in the early part of the last century has depended on drivers who choose to lease their trucks and their driving services to other trucking companies. Of course, organized labor, including the Teamsters Union, has been seeking this outcome for decades since they began shedding dues-paying members after the advent of economic deregulation in 1980.

The California law proved to be so controversial that it has been rewritten by the state legislature after a public uproar arose from various types of freelance workers. The law also resulted in the passage of a referendum last year in which voters excluded ride share drivers who work for Uber and Lyft, and drivers for home delivery services like DoorDash.

However, the law continues to pose an even more ominous threat for truckers and other companies that use independent contractors. AB 5 was passed in 2019 by the state legislature to engrave into law a decision handed down in 2018 by the California Supreme Court creating the same ABC test. In January 2020, the same court ruled that the standard would be applied retroactively.

To make matters more complicated, the Ninth Circuit Appeals Court also has held previously that the California Supreme Court’s original decision that established the ABC test also should be applied retroactively to employers.

However, the same law could be coming soon to where you work if Congress succeeds in passing the Protecting the Right to Organize Act (PRO Act), a bill favored by labor unions and strongly supported by Democrat legislators that would outlaw right-to-work laws in states, authorize secondary boycotts, institute card check and subject management to personal civil liability for labor law violations.

Among the other provisions boosting the interests of organized labor, it also would apply the same California ABC test for contractors nationwide. That legislation has already been approved by the U.S. House of Representatives and now is undergoing consideration by the Senate.

Legislative efforts seeking to replicate California’s law have been mounted in other states, and federal agencies like the Department of Labor have grappled with the issue over the years. One thing is certain—it’s not going away anytime soon.

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