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Trucking Companies Ordered to Comply With Landmark California Labor Law

The Ninth Circuit ruling gives a boost to California's landmark labor law AB 5 --- and to independent truckers.

(CN) --- Upholding California’s historic labor law Assembly Bill 5 on Wednesday, a Ninth Circuit panel found the law is not preempted by federal laws governing the trucking industry and ordered carriers previously offered a reprieve by a federal judge to begin complying with the law.

Reversing the district court’s preliminary injunction blocking enforcement of California’s labor classification law for employees and independent contractors, U.S. Circuit Judge Sandra S. Ikuta --- a George W. Bush appointee writing on behalf of herself and U.S. District Judge Douglas P. Woodlock, a Ronald Reagan appointee sitting by designation from the District of Massachusetts --- found AB 5 is not preempted by the Federal Aviation Administration Authorization Act.

The 1994 act, also called F4A, preempts state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property.”

But the panel found AB 5 did none of those things.

"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, we conclude that it is not preempted by the F4A," Ikuta wrote for the majority.

The California Trucking Association, a trade organization representing motor carriers that hire independent contractors who own their own trucks, known as “independent owner-operators,” filed suit in the Southern District of California in October 2018, claiming F4A preempted AB 5.

CEO Shawn Yadon stood by those claims following Wednesday’s ruling.

“We continue to stand by our initial claim that the implementation of AB 5’s classification test is preempted 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,” Yadon said in a statement provided to Courthouse News.

He added: “The California Trucking Association will take whatever legal steps are necessary to continue this fight on behalf of independent owner-operators and motor carriers operating in California.”

In the 39-page order, Ikuta contextualized the legislative environment which led to deregulation of the trucking industry beginning in the late 1970s.

She compared the F4A to the Airline Deregulation Act, finding the preemption clause in both laws uses “nearly identical text” and the litigation history challenging the airline act could guide the Ninth Circuit’s findings regarding the F4A and AB 5.

Ikuta noted the Supreme Court’s decisions related to preemptions under the F4A “tended to construe the F4A narrowly” regarding state laws “related to prices, routes and services.”

And while California’s general labor laws including its prevailing wage and meal and rest break laws --- as the Ninth Circuit decided in the Dilts decision --- might have increased the costs of doing business by requiring motor carriers hire more employees to comply with the laws, because they did not mandate rates, services and routes, those laws were not preempted by the F4A, Ikuta wrote.

Likewise, because “AB 5 is not significantly related to rates, routes or services … we conclude the F4A does not preempt AB 5 as applied to motor carriers,” Ikuta wrote, rejecting CTA’s argument AB 5’s impact would so significantly disrupt current motor carrier operations as to have an effect on prices, routes and services Congress intended to preempt under F4A.

“Our precedents have consistently considered and rejected predicted effects similar to those raised by CTA. We see no basis for departing from our precedent holding that a law increasing motor carriers’ employee costs, but not interfering at the point where the motor carrier provides a service to its customers, does not simply fall ‘into the field of laws’ that Congress intended to preempt,” Ikuta wrote.

In a 17-page dissent, U.S. Circuit Judge Mark J. Bennett --- a Donald Trump appointee --- disagreed with his colleagues’ assertion AB 5 could not be preempted by F4A because it is characterized as a generally applicable labor law.

“I do not agree, however, that a law like AB 5 --- 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,” Bennett wrote.

He added: “AB 5 mandates the very means by which CTA members must provide transportation services to their customers. It requires them to use employees rather than independent contractors as drivers, thereby significantly impacting CTA members’ relationships with their workers and the services that CTA members are able to provide to their customers.”

A spokesperson for the state Attorney General’s Office said they were “pleased with the court’s decision.”

“At the California Department of Justice, we’ll continue to defend laws that are designed to protect workers and ensure fair labor and business practices,” the spokesperson said.

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