California brief reveals AB-5’s per se violation of the dormant Commerce Clause of the Constitution.

California has exposed that its AB-5 constitutes a per se violation of the dormant Commerce Clause of the United States Constitution, explains the brief filed by The Cullen Law Firm, PLLC, on behalf of the Owner-Operators Independent Drivers Association, Inc., (“OOIDA”) on July 21, 2023.  OOIDA alleges that California’s worker classification statute, Cal. Labor Code § 2775 (commonly known as AB 5) violates the dormant Commerce Clause and Equal Protection clauses of the United States Constitution and seeks a preliminary injunction prohibiting the state from enforcing the law against the trucking industry.

California states that it intended AB-5 to address problems with the misclassification of workers as independent contractors rather than employees, and that this problem denies such workers the benefits of employee status, including minimum wage, insurance coverage, paid time off, and the like. But AB-5 does so by presuming that all workers are employees unless they can meet a three-part “ABC” test or fall into one of the numerous exemptions to the law.  

 Members of the trucking industry brought this legal challenge because the ABC test makes it all but impossible for truck drivers to operate as independent contractors.  Small business truckers and individual drivers do not necessarily want to be employees, preferring the independence of choosing where and when to haul loads, what trucks and equipment to own and how to maintain them, and allowing them to build their businesses as they see fit. OOIDA argues that, by deeming as employees the truck drivers who are properly operating as independent contractors, the effect of AB-5 is to address misclassification with more misclassification.

However, through its brief, California asserts, for the first time that truck drivers can use AB-5’s business-to-business exemption to establish themselves as an independent contractor.  OOIDA replies that, to its knowledge, this is the first time that California has publicly interpreted the business-to-business exception to apply to truck drivers.  OOIDA informs the Court, however, that the business-to-business exception conflicts with the federal rules that govern the contracts between motor carriers and independent contractor drivers.  

 Federal regulations require that the lease (contract) between carriers and drivers for the operation of the drivers’ truck “shall . . . provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease.” 49 C.F.R. § 376.12(c).  OOIDA argues in its brief that the federal rules defeat two of the business-to-business exemption requirements:

 …Section 2776(a)(1), which requires that the individual be free from control of the contracting business; and Section 2776(a)(8), which requires the independent contractor to advertise and hold itself out to the public as available to provide the same or similar service. An independent contractor whose vehicle is under exclusive use and control of a motor carrier in compliance with the Truth-in-Leasing rules cannot, by definition, be free from control of the motor carrier and, therefore, cannot hold itself out to the public and advertise its availability to perform that same service.

Because the combined effect of these laws is to permit drivers operating solely within California to use the business-to-business exemption and denies the benefits of that exemption to drivers in interstate commerce, OOIDA argues that AB-5 is per see unconstitutional.  A state is prohibited by the Constitution from enacting laws that have a discriminatory impact favoring its own residents over residents of other states.

The brief at issue is OOIDA’s Reply Brief in Support of the Motion for Preliminary Injunction in the case of California Trucking Association v. Bonta, Case No. Case 3:18-cv-02458-BEN-DEB, in the United States District Court for the Southern District of California.  A copy of the brief is available HERE. For further information, please contact Paul D. Cullen, Jr. (paul@cullenlaw.com) or Charles S. Stinson (charles@cullenlaw.com).