In several recent articles, we discussed the potential impact of AB5 (now referred to as California Labor Code § 2775). The law went into effect on January 1, 2020, addressing the classification of workers as employees or independent contractors.
Several lawsuits were filed challenging AB5. In one the California Trucking Association filed a lawsuit contending that AB5 was preempted by the supremacy and commerce clauses of the U.S. Constitution and was in direct conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994.
On January 16, 2020, Judge Roger Benitez of the US District Court issued a preliminary injunction prohibiting California from applying AB5 to motor carriers. On September 1, 2020, the issue of whether the preliminary injection issued by Judge Benitez was appropriate was heard by a panel of the Ninth Circuit Court of Appeals.
Most recently, the Ninth Circuit Court of Appeals, in a 2-1 panel ruling, overturned the District Court’s preliminary injunction against AB5. In reversing the preliminary injection staying enforcement of AB5, the Court found that the California Trucking Association was unlikely to succeed on the merits of its claim in District Court.
The Ninth Circuit Court of Appeals held that AB5 was applicable to motor carriers. By way of review, pursuant to AB5, all workers are presumed to be employees. However, a worker can still be classified as an independent contractor if they can satisfy the “ABC Test.” Under this test, a worker is an independent contractor only if he or she:
(A) is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
(B) performs work that is outside the usual course of the hiring entity’s business, and
(C) is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
All three prongs of the “ABC Test” must be satisfied for workers to be independent contractors. The California Trucking Association was most concerned with prong “B” of the ABC Test.
Following the decision from the 3-Judge Panel, the Ninth Circuit denied a petition for an appeal of the decision to an en banc sitting of the Court.
On June 23, 2021, the Ninth Circuit granted the California Trucking Association’s request to keep the preliminary injection in effect while the Association petitioned the United States Supreme Court for review of the issue. The California Trucking Association has now sought review by the U.S. Supreme Court and we await a decision from the Court on whether they will hear the case.
We will provide an update when a decision is reached by the US Supreme Court. Currently, AB5 is not applicable to motor carriers in California due to the continued preliminary injection. However, if the U.S. Supreme Court refuses to hear the case, it is anticipated that AB5 will immediately apply to motor carriers in California.
This publication is not intended to be all-encompassing and does not cover all situations and exceptions to general rules. To discuss the applicability or interpretation of any provision of the law to a specific situation, please contact an attorney at Hedrick Gardner Kincheloe & Garofalo, LLP.