AB 5 May Apply to Truckers Following Ruling by California Appeals Court

A state court of appeals has ruled that California’s worker-classification law is not preempted by a federal law that effectively bars states from interfering with certain trucking industry regulations. This decision will affect commercial truck drivers in the state.

In a decision filed on Nov. 19, 2020, the Second Appellate District reversed a trial court decision which held that because the ABC test significantly impacted motor carriers’ prices, routes, and services, it was preempted by federal law.

Guided by the precedent set forth in a 2014 case, People ex rel. Harris v. Pac Anchor, the panel of justices found that while the Federation Aviation Administration Authorization Act of 1994 (FAAAA) did preempt state laws which are “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property,” it does not preempt California’s ABC test codified under AB 2257 with respect to the use of independent contractors.

According to the court’s opinion, the case stemmed from the illegal misclassification practices of federally licensed motor carriers that operated throughout the Long Beach and Los Angeles areas, using independent truckers to transport cargo to and from the ports.

As a result of a history of misclassification as to these types of drivers, the Los Angeles City Attorney, on behalf of the People of the State of California, filed separate complaints in January 2018 against three trucking companies raising claims under the Unfair Competition Law, and California business law alleging misclassification and violations of federal Truth-in-Lending regulations.

In the complaints, the People asserted that Cal Cartage Transportation Express LLC, CMI Transportation LLC, and K&R Transportation California LLC failed to pay and withhold various taxes and that they engaged in several labor law violations including failure to provide Workers’ Compensation, itemized written wage statements, business expense reimbursement, and minimum wage.

The People also alleged that the trucking companies effectively took thousands of dollars from the drivers each year by effectively making them pay for their own fuel, insurance, repairs, and parking expenses, as referenced in the appellate opinion.

Subsequent to the lawsuits being filed against the trucking companies, AB 5 became effective on Jan. 1, 2020, codifying a three-part test found in California case law, requiring that most workers be classified as employees rather than independent contractors unless all three elements of the test were satisfied. Months later, in September 2020, AB 2257 was signed into law, revising the business-to-business exemption contained in AB 5 as well as creating other exemptions from the independent contractor rule.

Finding that the ABC test is a “law of general application,” the appellate court held that although independent owner-operator truck drivers may be misclassified as to the ways in which the trucking companies use them, the ABC test does not actually prohibit trucking companies from using independent contractors. “The ABC test, therefore, is not the type of law Congress intended to preempt,” the appellate panel stated in the opinion.

While the trucking companies contended that the strict state worker classification law should be preempted by the FAAAA because they wouldn’t be able to satisfy the business-to-business exemption under AB 2257, the court was unpersuaded by these arguments.

The court stated that only one of the trucking companies indicated they did not operate their own trucks and contracted with trucking companies in addition to independent contractors. “Those trucking companies, referred to as “outside carriers” or “outside brokers,” are legally organized business entities and appear to be among the kinds of businesses contemplated by the business-to-business exemption,” the opinion said.

What Are AB 5 and AB 2257?

As a result of widespread worker misclassification, California enacted Assembly Bill 5 to help ensure workers who were entitled to certain employment protections under the law would receive them.

Under AB 5’s “ABC test,” an employer must satisfy each of three elements to classify a worker as an independent contractor:

• The worker must be free from the control of the hiring entity in both contract and performance of the work.
• The worker performs work that is outside the usual course of the hiring entity’s business.
• The worker is engaged in an independently established business or is involved in an occupation of the same nature as the work performed.

Unless all three prongs in the test are met, a worker cannot be deemed an independent contractor in California and must be classified as an employee.

While AB 5 includes exemptions for specific categories of professions, as well as an exemption for business conducted with another entity, the law was met with a significant amount of controversy. Critics of AB 5 argued that it restricted independent contractors and freelancers from conducting business in various industries.

As a result of pushback, the California legislature passed AB 2257, which revises parts of AB 5, expands the exemptions set forth under AB 5, and further clarifies the business-to-business exemption.

The AB 5 Truck Driver Worker Classification Case is The People v. The Superior Court of Los Angeles County et al., Case No. B304240, in the Court of Appeal for the State of California, Second Appellate District.

Join a Free Trucker Overtime Class Action Lawsuit Investigation

You may qualify for legal help through this investigation under the following circumstances:

• You worked as a independent contractor driver in California;
• You live in California OR you drive through California;
• You believe you were underpaid; and/or
• The trucking company failed to honor a contract with you.

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