On December 31, 2019, the United States District Court for the Southern District of California issued an order temporarily enjoining the enforcement of Assembly Bill (AB) 5 as to any motor carrier in California, pending a hearing on a motion for preliminary injunction which is set for January 13, 2020. The Court’s order has the effect of preventing the State Attorney General, the Labor Development Workplace Agency, the Department of Industrial Relations, the California Labor Commissioner, and the Employment Development Department from enforcing the new law against “owner operators” as well as other persons who have traditionally been retained as independent contractors in the trucking industry.
AB 5 provides that a person hauling or driving freight for a motor carrier is presumed to be an employee of the carrier unless (1) the person is free from control of the hiring entity, (2) the person performs work that is outside the usual course of the hiring entity’s business, and (3) the person is customarily engaged in an established trade, occupation or business of the same nature as that involved in the work performed. This three-part test is known as the “ABC test” based on the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court.
The district court’s New Year’s Eve decision in California Trucking Assn. v. Becerra held that the second prong of the ABC test is preempted by the Federal Aviation and Administration Authorization Act of 1994 (“FAAAA”), which prohibits states from enacting or enforcing laws or regulations that relate to “a price, route or service of a motor carrier . . . with respect to the transportation of property.” Relying on the Ninth Circuit Court of Appeals’ 2009 decision in American Trucking Ass’n, Inc. v. City of Los Angeles, the court held that an “all or nothing rule” requiring services to be performed by certain types of employee drivers is “likely preempted” by the federal law. The court ruled that the equities weighed in favor of granting the injunction and that it was in the public interest to do so, based in part of the fact that AB 5 provides an alternative test for determining independent contractor status based on the 1989 case of S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (the “Borello standard”) in the event AB 5 was struck down.
The new law will accordingly not affect a motor carrier’s ability to continue to use owner operators to haul freight in California, at least until the hearing before the court on January 13.