Is the FAAAA Preemption Writing on the Wall for AB 5?

, , , , News, The Cullen Law Firm, PLLC

 

Motor carriers and owner-operators are closely watching the State’s appeal of the preliminary injunction granted in the California Trucking Association’s (“CTA”) legal challenge to AB 5. There is reason to believe the United States Courts of Appeals for the Ninth Circuit will affirm the district court’s holding that AB 5 is likely preempted by the Federal Aviation and Administration Authorization Act of 1994 (“FAAAA”).[1] Such a decision could effectively put an end to AB 5. But CTA’s legal challenge and FAAAA preemption may not be the whole story. A plot twist featuring Uber and the constitutional right to economic liberty may be developing 121 miles north up I-5.[2]

A Familiar Story: FAAAA Preemption of State Motor Carrier Regulations

FAAAA preemption has frequently been relied upon to invalidate state regulation of motor carriers. Even the ABC worker classification test is no stranger to FAAAA preemption.[3] Accordingly, it was not a complete surprise when the United States District Court for the Southern District of California issued a preliminary injunction on FAAAA preemption grounds.[4]

Prior to the CTA’s challenge of AB 5, several federal courts had found similar ABC worker classification tests preempted by the FAAAA. The First Circuit found Massachusetts’ substantively identical ABC test preempted by the FAAAA in Schwann v. FedEx Ground Packaging System.[5] Several California federal district courts adopted the same approach and held that the FAAAA preempted California’s ABC test, then under the Dynamex decision.[6] Even the Ninth Circuit has suggested that ABC-like tests would be subject to FAAAA preemption.[7]

Unless the Ninth Circuit is on a Different Page

Given the numerous cases that have held ABC worker classification tests are preempted by the FAAAA, motor carriers and owner-operators would be forgiven for assuming they know how the AB 5 story ends. But the Ninth Circuit has consistently resisted the same broad FAAAA preemption that the First Circuit relied upon in Schwann.

In Dilts v. Penske Logistics, LLC, the Ninth Circuit outlined and reaffirmed its narrow interpretation of FAAAA preemption in holding that California’s meal and rest break are not preempted.[8] First, the “scope of the pre-emption must be tempered by the presumption against pre-emption of state police power regulations . . . [and] [w]age and hour laws constitute areas of traditional state regulation.”[9] Second, “Congress did not intend to preempt generally applicable state transportation, safety, welfare, or business rules that do not otherwise regulate prices, routes, or services.”[10] Finally, a state law does not meet the FAAAA’s “related to” test for preemption “just because it shifts incentives and makes it more costly for motor carriers.”[11] Applying this framework, the Ninth Circuit held that California’s meal and rest break laws are not preempted because “[t]hey do not set prices, mandate or prohibit certain routes, or tell motor carriers what services they may or may not provide . . . they are normal background rules for almost all employers doing business” in the state.[12]

Several courts have noted that the Ninth Circuit’s analysis in Dilts, which reaffirmed its narrow preemption jurisprudence, appears to conflict with Supreme Court precedent.[13] Since the Ninth Circuit has not shied away from Dilts, it may be premature to assume that dicta from cases like California Trucking Association v. Su indicates a happy ending for CTA’s FAAAA preemption claim.

Is an Uber Plot Twist in the Works?

Regardless how the Ninth Circuit rules on FAAAA preemption of AB 5, an alternate storyline may be developing at the United States District Court for the Central District of California.[14] There, Uber (along with Postmates and two independent contractors) is challenging AB 5 on entirely different grounds.[15] A victory for Uber could prevent AB 5 from being enforced in any manner.

Unlike CTA, which brought claims specific to the motor carrier industry[16], the thrust of Uber’s challenge to AB 5 is that the ABC worker classification test violates the constitutional right to economic liberty.[17] Relying on both the California and United States Constitutions, Uber claims that AB 5 is arbitrary, irrational, and “impedes the achievement of economic security, which is essential for the pursuit of life, liberty and happiness.”[18] Uber emphasizes that AB 5 is replete with politically influenced carveouts, was motivated by animus toward the gig economy, and makes unlawful an otherwise lawful, mutually agreed to contracts.[19]

Motor carriers and owner-operators should pay close attention. The outcome of Uber’s legal challenge may have direct bearing on the future of the owner-operator model. That may be even more true if the ABC test is adopted at the federal level, as the House of Representatives recently voted.[20] A federal ABC worker classification test would not be vulnerable to CTA’s FAAAA preemption and dormant Commerce Clause claims.

The district court’s recent denial of Uber’s motion for a preliminary injunction[21] is not the end of this potential alternate ending for ABC worker classification tests.[22] We may soon learn if Uber’s legal challenge will play a significant role in writing the story.

For more information about AB 5, the ABC test, and the ABC test’s impact on owner-operators and the motor carrier industry, please contact:

 

Gregory R. Reed                     (202) 298-4767 grr@cullenlaw.com

Paul D. Cullen, Jr.                   (202) 944-8600 pxc@cullenlaw.com

 

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[1] See California Trucking Ass’n v. Su, 903 F.3d 953, 964 (9th Cir. 2018); American Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1053 (9th Cir. 2009).

[2] See Complaint, Olson v. California, No. 2:19-cv-10956-DMG-RAO (C.D. Cal. Dec. 30, 2019).

[3] See infra notes 5–6.

[4] California Trucking Ass’n v. Becerra, No. 3:18-cv-02458-BEN-BLM, 2020 WL 248993 (S.D. Cal. Jan. 16, 2020).

[5] 813 F.3d 429, 438 (1st Cir. 2016) (adopting a broad interpretation of FAAAA preemption, the First Circuit found that Prong B “poses a serious potential impediment to the achievement of the FAAAA’s objectives” because the “decision whether to provide a service directly, with one’s own employee, or to procure services of an independent contractor is a significant decision in designing and running a business” that “implicates the way in which a company chooses to allocate its resources.”)

[6] Valadez v. CSX Intermodal Terminals, Inc., No. 15-cv-05433-EDL, 2019 WL 1975460, at *6-8 (N.D. Cal. Mar. 3, 2019); Alvarez v. XPO Logistics Cartage, LLC, No. CV 18-03736 SJO, 2018 WL 6271965, at *4-5 (C.D. Cal. Nov. 15, 2018).

[7] See supra note 1.

[8] 769 F.3d 637 (9th Cir. 2014).

[9] Id. at 643.

[10] Id. at 644.

[11] Id. at 647.

[12] Id.

[13] See, e.g., Massachusetts Delivery Ass’n v. Coakley, 769 F.3d 11, 19-20 (1st Cir. 2014); cf. Air Transp. Ass’n of America, Inc. v. Cuomo, 520 F.3d 218, 223 (2d. Cir. 2008) (asserting that the Ninth Circuit’s approach in Charas v. Trans World Airlines, Inc., 160 F.3d 1259 (9th Cir. 1998), was inconsistent with the Supreme Court’s decision in Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364 (2008); Branche v. Airtran Airways, Inc., 342 F.3d 1248, 1256-58 (11th Cir. 2003) (departing from the Ninth Circuit’s narrow definition of “service”).

[14] See supra note 2.

[15] Joel Rosenblatt & Josh Eidelson, Uber Urges California Court to End AB 5, Transport Topics (Feb. 7, 2020), https://www.ttnews.com/articles/uber-urges-california-court-end-ab-5.

[16] CTA challenged AB 5 on both FAAAA preemption and dormant Commerce Clause theories.

[17] See Mem. in Support of Pls.’ Mot. for Preliminary Injunction at 9, 12–13, Olson v. California, No. 2:19-cv-10956-DMG-RAO (C.D. Cal. Jan. 8, 2020).

[18] Id. at 12 (citing Purdy & Fitzpatrick v. State, 71 Cal. 2d 566, 579 (1969).

[19] Id. at 9–14.

[20] Hugh R. Morley, US House backs bill to toughen worker classification, JOC.com (Feb. 7, 2020), https://www.joc.com/trucking-logistics/us-house-backs-bill-toughen-worker-classification_20200207.html?utm_source=Eloqua&utm_medium=email&utm_campaign=CL_JOC%20Daily%202%2F10%2F20%20_PC9156_e-production_E-54870_TF_0210_0617; see also Big Labor’s Payoff Day, WSJ (Feb. 9, 2020), https://www.wsj.com/articles/big-labors-payoff-day-11581289341?mod=opinion_lead_pos3.

[21] In Chambers – Order Re Plaintiffs’ Motion for Preliminary Injunction, Dkt. No. 52, Olson v. California, No. 2:19-cv-10956-DMG-RAO (C.D. Cal. Feb. 10, 2020).

[22] Joel Rosenblatt & Josh Eidelson, Uber Fails to Block California Gig-Worker Law for Its Drivers, Transport Topics (Feb. 10, 2020), https://www.ttnews.com/articles/uber-fails-block-california-gig-worker-law-its-drivers.

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