In a case alleging misclassification of an independent contractor in the transportation industry, the California Supreme Court has found that the California unfair competition law (Bus. & Prof. Code, § 17200 et seq.) (“UCL”) was not preempted by the Federal Aviation Administration Authorization Act of 1994 (Pub. L. No. 103-305 (Aug. 23, 1994) 108 Stat. 1569) (“FAAAA”). In P. ex rel. Harris v. Pac Anchor Transportation, Inc. (SC S194388 7/28/14), the Court held that California UCL was not preempted where a trucking company’s alleged violations of state labor and insurance laws did not relate to the employer’s “price, route or service,” the concerns of the federal law.

The Court noted the FAAAA was passed originally so “States would not undo federal deregulation with regulation of their own.” Therefore, the FAAAA included a pre-emption provision. The Court, however, rejected the employer’s argument that the FAAAA facially preempted all California UCL claims and, specifically, the case at issue. The Court ruled:

the FAAAA embodies Congress’s concerns about regulation of motor carriers with respect to the transportation of property; a UCL action that is based on an alleged general violation of labor and employment laws does not implicate those concerns.

The misclassification of workers can lead to widespread liability in many areas under California and federal law. Employers should consult with counsel when making decisions with respect to independent contractor status.