U.S. Supreme Court won't hear trucking industry challenge to Calif. employment law

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A large convoy head east bound on the 40 freeway as they head towards the nation's capital to protest against coronavirus disease (COVID-19) vaccine mandates, Daggett, California, U.S. February 23, 2022. REUTERS/Gene Blevins

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  • Lawsuit claimed state law would devastate trucking industry
  • The 2019 law says most workers are employees and not independent contractors
  • Trucking firms rely on independent contractor model to cut costs

(Reuters) - The U.S. Supreme Court on Thursday declined to take up a lawsuit from a trucking industry group claiming that a California worker classification law will be devastating for the industry and should be blocked.

The justices denied a petition by the California Trucking Association claiming the 2019 California law known as AB5, which makes it more difficult for businesses to treat workers as independent contractors rather than employees, is blocked by federal regulations governing the industry.

The CTA was seeking review of a 9th U.S. Circuit Court of Appeals ruling that said AB5 is a generally applicable labor law and is not preempted by the Federal Aviation Administration Authorization Act (FAAAA). That law, which also applies to the trucking industry, prohibits states from regulating the prices, routes and services offered by trucking companies.

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The CTA in a statement said, “gasoline has been poured on the fire that is our ongoing supply chain crisis.”

“We are disappointed the Court does not recognize the irrevocable damage eliminating independent truckers will have on interstate commerce and communities across the state," the group said.

A spokesperson for the California Attorney General's office said it was pleased with the court's decision.

The Supreme Court last October had declined to take up a separate case challenging the application of AB5 to truck drivers, and on Monday turned away a lawsuit by groups representing freelance workers claiming the law is unconstitutional.

AB5 codified a test created by the California Supreme Court in the 2018 case Dynamex Operations West Inc v. Superior Court to determine whether workers are truly independent contractors. The three-pronged "ABC test" says workers should be considered 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 issue is crucial for businesses because employees are entitled to the minimum wage, overtime and other benefits, making them much more expensive than independent contractors. The trucking industry has long relied on an "owner-operator" model dependent on independent contractors who own their trucks.

Trade groups and "gig economy" companies lobbied heavily against AB5, claiming it would deprive many workers of flexibility and the opportunity to work multiple jobs.

The CTA and a slew of other industry groups had urged the Supreme Court to take up the group's case and rule that federal law was designed to create a uniform nationwide standard for trucking companies to follow rather than having to comply with a patchwork of state laws.

The case is California Trucking Association v. Bonta, U.S. Supreme Court, No. 21-194.

For the CTA: Charles Rothfeld of Mayer Brown; Robert Roginson of Ogletree Deakins Nash Smoak & Stewart

For the state: Jose Zelidon-Zepeda of the California Attorney General's office

(NOTE: This article has been updated to include comments from the California Trucking Association and the California Attorney General's office.)

Read more:

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

U.S. Supreme Court won't hear freelancers' challenge to California employment law

Trucking group asks SCOTUS to review Calif. classification law

Calif. worker classification law applies to truck drivers - 9th Circuit

California truckers brace for new 'gig worker' rules

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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.