No SCOTUS review of California law's impact on trucking industry

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REUTERS/Ivan Alvarado

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  • California appeals court said state law not preempted by federal regulations
  • Trucking firm said law threatens industry's 'owner-operator' model
  • Separate challenge still pending at high court

Oct 5 - The U.S. Supreme Court on Monday declined to take up a trucking company's claims that California's strict worker classification law is preempted by federal regulations governing truckers' working conditions.

The court denied a petition for certiorari by Cal Cartage Transportation Express LLC, which claimed a state appeals court's 2020 ruling upholding the law known as AB5 threatens the longstanding "owner-operator" model in which drivers who own their trucks work as independent contractors.

The justices have yet to consider whether to take up a similar challenge to AB5 by the California Trucking Association, which is appealing a 9th U.S. Circuit Court of Appeals decision that said the law can be applied to truck drivers.

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Monday's case stemmed from complaints the city of Los Angeles filed claiming Cal Cartage and other trucking companies had unlawfully misclassified drivers as independent contractors rather than employees.

The company said AB5 is preempted by the Federal Aviation Administration Authorization Act (FAAAA), which also applies to the trucking industry and bars states from enacting laws that dictate the prices, routes and services offered by motor carriers.

The California Court of Appeal, Second District in Los Angeles said generally applicable laws may have some indirect effects on how companies operate, but fall well within states' powers to regulate employment relationships. And AB5 does not mandate the use of employees for any business, including trucking companies, the court said.

Cal Cartage and its lawyers at Gibson Dunn & Crutcher did not immediately respond to requests for comment on Tuesday. Nor did the California attorney general's office.

AB5 codified a test created by the California Supreme Court in the 2018 case Dynamex Operations West Inc v. Superior Court. The three-pronged "ABC test" says workers are a company's employees if they are under its direct control, engaged in its usual course of business, or do not operate their own independent businesses.

The standard has been heavily criticized by business groups who say it makes it impossible for many companies to hire independent contractors, which can help to contain costs.

After AB5 took effect in 2020, Los Angeles sought to apply it to Cal Cartage in the city's 2018 lawsuit claiming the company had violated state law banning unfair competition by misclassifying drivers.

Cal Cartage in response argued that AB5 made it virtually impossible for the company to rely on the longstanding owner-operator model. The resulting effects on the company's operations would impact the prices and services it offered, making AB5 preempted under then FAA, Cal Cartage said.

A state judge in early 2020 agreed and tossed out the case but the Second District reversed, saying the FAAAA was designed to preempt state laws that directly regulate how motor carriers operate and not those that merely increase costs.

Cal Cartage in its April petition for certiorari said AB5's impact on trucking companies is so significant that it ultimately dictates the prices and services they can offer.

And truck drivers by definition are engaged in trucking firms' usual course of business, so AB5 precludes them from ever being classified as independent contractors, the company said.

Editor's note: A previous version of this article incorrectly stated that the Supreme Court had denied certiorari in a separate lawsuit brought by the California Trucking Association.

California court says truckers exempt from gig worker law

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.