After almost two and a half years of appellate litigation that overturned a district court’s injunction against California’s enforcement of AB-5 against the trucking industry, two trucking associations have filed simultaneous motions seeking to put an injunction back in place while their legal challenge to the law proceeds. Each party presents different legal arguments than the court considered in granting its previous order.
California Assembly Bill 5 (AB-5), also known as the gig worker law, is a state law that presumes all workers are employees unless their business can demonstrate a set of factors under a test to prove that a worker is an independent contractor. AB-5 applies generally to all individuals who perform work in California, without regard to whether a worker is based out of state or works any amount of time in another state. This test is viewed as greatly restricting the number of workers who can be classified as independent contractors, especially in the trucking industry, where it is feared that the law will eliminate the independent owner-operator truck-driver business model.
One motion, filed by The Cullen Law Firm, PLLC, representing the Owner-Operator Independent Drivers Association, Inc., (“OOIDA”) argues that the dormant Commerce Clause to the U.S. Constitution prohibits California from enforcing AB-5 against motor carriers operating in interstate commerce. The Commerce Clause derives from the part of the Constitution that gives Congress the exclusive power to regulate interstate commerce. This provision was written because various states were imposing a “patchwork quilt” of tariffs and tolls on travel and other states’ goods that inhibited the young country’s economic growth and stability. Implied from this exclusive federal authority to regulate commerce, the courts recognized the dormant Commerce Clause, prohibiting states from imposing regulations and tolls that discriminate against or place unreasonable burdens upon people and businesses from other states.
In its motion for a preliminary injunction, OOIDA argues that the burden of complying with AB-5 to motor carriers operating in interstate commerce far exceeds any public policy benefit California might realize from such compliance. OOIDA points out that this is especially true for motor carriers whose drivers are based outside of California and spend less than 50% of their time in the state. OOIDA’s motion is supported by several declarations by owner-operators, a motor carrier, and OOIDA President Todd Spencer. Mr. Spencer informs the court in his declaration that motor carriers concerned with having to comply with AB-5 are instead avoiding that burden by no longer taking freight to California. The owner-operator and motor carrier declarants confirm that they are or will choose to avoid falling under AB-5 by no longer taking freight to California rather than hiring or becoming employee drivers.
The California Trucking Association (“CTA”) also makes a Commerce Clause argument, but its motion is primarily focused on a federal preemption argument under the Federal Aviation Administration Authorization Act (“F4A”). The F4A provides, in relevant part, that:
…a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier (other than a carrier affiliated with a direct air carrier covered by section 41713(b)(4)) or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.
49 U.S.C.A. § 14501. CTA argues that this federal statute, affirmatively and impliedly, preempts California from imposing AB-5 against the trucking industry.
This argument may sound familiar because it is based on the same statute that CTA relied upon to win the original preliminary injunction from the District Court in January 2020 but later lost in the U.S. Court of Appeals in April of 2021. If the Court of Appeals already decided that the F4A does not preempt AB-5, then how does CTA make this legal argument now? CTA essentially argues that the Court of Appeals’ analysis was focused on the relationship between the state and the motor carrier, deciding that AB-5 did not mandate a particular result related to a motor carrier’s price, route, or service.
In its new motion, CTA is urging the court to focus on the relationship between motor carriers and their shippers, arguing from the actual experience of motor carriers, that AB-5 mandates a change to this relationship with “respect to the transportation of property.” CTA asserts that AB-5 mandates the owner-operators of motor carriers operating in California to become employee drivers. CTA then presents evidence that, in anticipation of AB-5, owner-operators are refusing to become employee drivers, leaving motor carriers with no drivers. Without drivers, AB-5 necessarily results in motor carriers no longer being able to provide the same service to its shippers and is, therefore, preempted by the F4A. CTA explains that the Court of Appeals did not have the occasion to decide this argument and evidence in the previous appeal.
The impact of AB-5, to cause motor carriers and owner-operators to choose not to operate on California roads rather than becoming employees is, perhaps, an unanticipated consequence of AB-5. This consequence, as Mr. Spencer states in his declaration, “will likely cause the cost of trucking services to California to rise and make worse an already constricted supply-chain in and out of California.”
These consequences of AB-5 are also notable given California’s apparent forbearance, thus far, from enforcing the law against the trucking industry. The state has been free to enforce AB-5 against trucking companies at least since the District Court recognized the Court of Appeals decision and mandate at the end of August 2022. But the state has given no indication of who its first targets will be in the trucking industry, how it might interpret AB-5 as applied to the trucking industry, and when it will begin such enforcement.
The responses of the State and the Intervenor International Brotherhood of Teamsters to the OOIDA and CTA motions are due to be filed by March 8, 2023. Reply briefs will be due on March 29, and a hearing on the motions is scheduled for May 1.