California Asks Ninth Circuit to Make Trucking Companies Comply With AB 5 Employment Law

Truck drivers stop at a gas station. (AP Photo/David Tulis, File)

(CN) — Claiming California’s historic labor law Assembly Bill 5 is not preempted by federal laws governing the trucking industry, the state asked a Ninth Circuit panel Tuesday to require motor carrier compliance with the 2019 employment law.

California’s AB  5, which codified the three-prong “ABC” test for determining if a worker is an employee — entitled to employment protections and benefits — or an independent contractor, has been fought by industries across the state including rideshare companies, news companies and freelance journalists.

Earlier this year, trucking companies got a reprieve from having to comply with the law by U.S. District Judge Robert Benitez, a George W. Bush appointee, who issued a preliminary injunction preventing enforcement of AB 5 against property-carrying trucks as their case challenging the law makes its way through court.

The motor carrier industry typically contracts with independent owner-operators who own their own rigs and perform trucking services for various companies engaged in interstate commerce. They claim AB 5 upends their business model of using independent contractors.

Benitez found the California Trucking Association was likely to succeed on its claim AB 5 is preempted by the Federal Aviation Administration Authorization Act, which prohibits states from passing laws “related to a price, route, or service of any motor carrier.”

But the state thinks Benitez is wrong.

In its brief, it argued the Ninth Circuit has previously found the act does not preempt “generally applicable state labor laws that protect employees.”

Benitez made no finding as to whether AB 5 influenced the prices, routes and services of motor carriers protected by the act, undermining his finding that the California Trucking Association would likely prevail on its preemption claim, according to Attorney General Xavier Becerra. 

In a virtual hearing Tuesday, Deputy Attorney General Jose Zelidon-Zepeda reiterated the state believes AB 5 is not preempted by what lawyers on both sides referred to as “F Quad A.” He was interrupted by U.S. Circuit Judge Mark J. Bennett — a Donald Trump appointee — and asked to explain how the “ABC” test to determine if a worker is an employee or independent contractor isn’t an “all-or-nothing” test.

Zelidon-Zepeda said it was a “difficult determination” to make based on the case, as the AB 5 challenge was brought by a trade association rather than an individual business, which could directly point to their operations being impacted by AB 5.

Andrew Kushner, Zelidon-Zepeda’s co-counsel representing the International Brotherhood of Teamsters, argued the question the panel should focus on was not whether the “ABC” test was an all-or-nothing test but whether the business-to-business exemption to AB 5 could permit the motor carriers to continue operating business-as-usual.

“The application of that portion of AB 5 is determined by the courts; it’s not the state’s call of whether or not that would apply,” Kushner said.

“Plaintiff must demonstrate the business-to-business exemption is foreclosed for motor carriers and they haven’t made that showing,” he added.

Kushner said there is no evidence the motor carriers are precluded from contracting with owner-operators and the trucking association itself made a “concession” in the case record it continues to contract with owner-operators while AB 5 is in effect.

U.S. District Judge Douglas P. Woodlock — a Ronald Reagan appointee sitting with distinction from the District of Massachusetts — took issue with Kushner’s characterization of the legal dispute.

“We still have no evidence of how this actually works – if it is difficult for owner-operators to function in this context,” Woodlock said.

Andrew Tauber, with Mayer Brown, represents the California Trucking Association and argued AB 5 could be preempted by federal law because, in his view, it is not a labor law on general applicability, as evidenced by the numerous exemptions and carve-outs made for certain industries.

Tauber pointed to comments made by the bill’s author — Assemblywoman Lorena Gonzalez — who specifically referenced what she called the trucking industry’s “outdated model” as what the law was crafted to correct.

When pressed by U.S. Circuit Judge Sandra S. Ikuta — a George W. Bush appointee — about how this case was “different” from similar cases where the Ninth Circuit found state labor laws were not preempted by the Federal Aviation Administration Authorization Act, Tauber said the other cases were “dealing with drivers who were unquestionably employees.”

AB 5 — according to Tauber — is “a sea shift of major proportions,” which will force motor carriers to hire employees, purchase, store and maintain vehicles and hire human resources personnel, among other changes to their current business model.

But Woodlock pointed out that Benitez “didn’t really make a factual determination” regarding the impact of AB 5 on motor carriers when he granted preliminary injunction to CTA, calling his ruling “conclusory.”

Zelidon-Zepeda agreed, saying the district court did not “point to evidence” and “basically made its own determination based on what it thought the impact of the law would be based on the claims of plaintiff.”

“F Quad A was not intended to immunize motor carriers from all state laws,” Zepeda said.

“The sky is not the limit and preemption has to run its course at some point.”

The matter was taken under submission.

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