Good news for the motor carrier industry … for now. A federal judge has issued a temporary restraining order that prevents the state of California from enforcing a strict independent contractor misclassification law against motor carriers—that was set to take effect on January 1—until the court resolves a lawsuit challenging the law brought by the California Trucking Association (CTA).
Assembly Bill 5 (AB 5) establishes that the work of owner-operators must pass a three-pronged test, commonly called the ABC test, to allow employers to designate them as independent contractors rather than employees. The law will have a profound impact on the motor carrier industry and, CTA alleged in its suit, will make it “impracticable if not impossible for CTA’s motor-carrier members to provide interstate trucking services by contracting with independent owner-operators.” On December 24, CTA filed a motion for a TRO seeking to delay the law’s implementation until the resolution of its previous motion for a preliminary injunction.
Judge Roger T. Benitez of the U.S. District Court for the Southern District of California found that CTA had met its burden to obtain the emergency relief requested by showing “(1) they are likely to succeed on the merits, (2) likely to suffer irreparable harm in the absence of relief, (3) the balance of equities tips in their favor and (4) that their requested relief is in the public interest.”
At particular issue in the case is Prong B of the ABC test, which states that a person is an employee unless they “perform work outside of the usual course of the hiring entity’s business.” The court found that this likely is preempted by the Federal Aviation Administration Authorization Act, which, in pertinent part, prohibits any state from “enact[ing] or enforce[ing] a law, regulation or other provision having force and effect of law related to price, route or service of any motor carrier…with respect to the transportation of property”—effectively stating that AB 5 “mandates that motor carriers treat owner operators as employees, rather than as the independent contractors that they are.” Judge Benitez, in further clarifying his position, found that motor carriers, in essence, could never satisfy Prong B, as drivers perform services in the usual course of a motor carrier’s business.
While the TRO is a good sign for the motor carrier industry, there may be twists and turns in the road ahead. The next hearing on the case is slated for January 13.
California Trucking Association, et al., v. Attorney General Xavier Becerra, et al.