California’s Trucking Industry Not Exempted from AB 5 Independent Contractor Law

On April 28, 2021, the Ninth Circuit Court of Appeals reversed a lower federal court’s preliminary injunction preventing AB 5, California’s independent contractor law, from applying to motor carriers and independent owner-operators conducting business in California. AB 5 codified the independent contractor test (ABC test) established by the California Supreme Court in the 2018 Dynamex Operations West, Inc. v. Superior Court case.

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 issue for the California Trucking Industry is whether hiring entities could meet the “B” prong under the test.

In January 2020, the U.S. District Court for the Southern District of California in California Trucking Association, et al. v. Becerra, et al. issued a preliminary injunction preventing the state of California from enforcing AB 5 against motor carriers and owner-operators in the trucking industry. In justifying its decision, the Court held that AB 5 is preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA), which preempts any state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property.”

In its decision to reverse the district court’s preliminary injunction, the Ninth Circuit held that AB 5 is not preempted by the FAAAA because AB 5 “is 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 at the level of its customers.”

As a result, the preliminary injunction will soon be lifted. However, if the California Trucking Association appeals to the U.S. Supreme Court, the preliminary injunction could be stayed. Employers Council members that utilize independent contractors to transport property in California or have general questions about this case can contact the California Legal Services team at CAInfo@employerscouncil.org.