In a 2-1 decision on April 28, a three-judge panel of the 9th U.S. Circuit Court of Appeals has lifted a lower court’s injunction that upheld the California Trucking Association’s (CTA) claim that the Federal Administration Authorization Act of 1994 preempted implementation of California’s AB5 for the trucking industry.
The lifting of the injunction, which could happen as soon as May 19, will force tough decisions for the trucking industry in the state. CTA still has 14 days to ask for a rehearing and as much as five months to appeal to the U.S. Supreme Court.
The injunction had continued to make it possible for trucking companies to hire owner-operators as independent contractors despite wording in AB5, the B prong of the law’s ABC test, which says, “the worker performs work outside the usual course of the hiring entity’s business.” This prong has been an almost impossible hurdle to clear for independent truckers.
In its decision, the appellate court said that AB5 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, and is not preempted by the FAAAA.”
In a press release, CTA said it still believes truckers should be exempt from AB5. To include trucking within the scope of the law “is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the transportation industry. The California Trucking Association will take whatever legal steps are necessary to continue this fight.”
In contrast to CTA, the Teamsters Union was overjoyed by the decision, saying in a press release, “Today’s ruling from the 9th Circuit is a massive victory for California’s truck drivers, who for far too long have faced exploitation and misclassification at the hands of trucking companies that place corporate profit ahead of drivers’ safety and well-being.”
Meanwhile, trucking firms statewide will need to prepare for the worst. One radical idea is for a company to fire all of its company drivers and make its brokerage division the core of the company so it can then hire independent owner-operators. The company’s main business would be brokering freight instead of moving it.
The two judges in the majority, Sandra Ikuta and Douglas Woodlock were appointed by George W. Bush and Ronald Reagan, respectively, while Justice Mark Bennett, who made the dissenting vote, was appointed by Donald Trump.
In his dissenting opinion, Bennett argued that rates, routes, and services will be disrupted by the imposition of AB5 against truckers in California. “In addition to altering motor carriers’ relationships to their workers, AB5 will significantly impact motor carriers’ services to their customers by diminishing the specialized transportation services that motor carriers are able to provide through independent contractor drivers,” Bennet wrote.
