In case you missed the news last week, here is an update on the controversial AB5 law in California which, in theory, could affect the entire United States if it were up to President Biden. I say this because Biden has gone on record to say if he were elected, he would be the best pro-union President this United States has ever seen. And guess what – he is now President. In fact, to the best of my knowledge, he has included AB5 in his Pro Act, which was passed in the House of Representatives on March 9, 2021. The bill is currently waiting consideration by the Senate.
California’s controversial AB5 law, which would largely eliminate the traditional owner operator model for trucking in the state, could go into effect as soon as this month – if the Supreme Court takes the advice of the U.S. solicitor general and declines to hear a California Trucking Association (CTA) lawsuit challenging it. Passed in 2019, AB5 established an “ABC test” to determine whether a worker is an employee or an independent contractor. The CTA challenged it and obtained a preliminary injunction, but that was overturned on appeal. The injunction remains in place, pending CTA’s appeal to the Supreme Court.
The case may have hit a stumbling block in the form of the U.S. solicitor general, who on May 24 filed a brief recommending the Supreme Court deny review of the case (the solicitor general is the federal government’s representative before the Supreme Court). The court could still decide to take up the case, and it could make that decision before it recesses for the summer.
AB5 took a 2018 state Supreme Court decision and turned it into law. That decision said that certain workers should be presumed employees instead of independent contractors when evaluating wage and hour classification in class-action cases. The ruling required companies to use a newly adopted ABC test to determine who is an independent contractor, which consists of certifying: A) That the worker 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 work and in fact; B) That the worker performs work that is outside the usual course of the hiring entity’s business; and C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Most legal analysis of the ruling agrees the ABC test, in particular the “B” prong, sets an impossible standard for motor carriers using independent contractor owner operators to meet. The CTA’s lawsuit contends that the AB5 legislation is pre-empted by a federal law, known as FAAAA or F4A, that forbids state laws relating to prices, routes, and services of motor carriers. The court agreed and granted an injunction prohibiting enforcement of AB5 with respect to the trucking industry.
But that decision was reversed on appeal by a divided panel of the U.S. Court of Appeals for the Ninth Circuit, using “A narrow test unique to the Ninth Circuit,” according to a May 24 email “law alert” from Scopelitis, Garvin, Light, Hanson & Feary. The 2-1 panel concluded that the FAAAA does not preempt generally applicable labor laws like AB5. The injunction was allowed to remain in place pending CTA’s appeal to the Supreme Court.
Last November, the Supreme Court invited the solicitor general’s office of the Department of Justice to express the views of the federal government on the case – “A solid indication that several of the Justices have an interest in taking the case up,” said American Trucking Association’s General Council Rich Pianka in an email to the ATA members. On May 24, the solicitor general issued her opinion, but it was a disappointing one for the trucking industry.
“Although the circuits have reached differing outcomes with respect to FAAAA preemption of the ABC test as codified under the laws of various states, those case-specific decisions do not create a conflict warranting this court’s review,” said the solicitor general. “Moreover, the interlocutory posture of this case and the need to resolve a threshold issue of state law – namely, whether motor carriers and Independent Contractor Owner Operators may fall within the business-to-business exemption under California law – make this case a poor vehicle in which to address the question presented. Further review is unwarranted.”
So, what’s next for California’s Independent Contractors? “While disappointing, the recommendation was not a surprise, given the policy priorities of the administration,” said ATA’s Pianka. “The court itself is free to disagree with the solicitor general, and often does – for example, when ATA brought its Los Angeles Port challenge to the Supreme Court, the court granted review despite the solicitor general’s contrary recommendation.”
Scopelitis attorneys said, “Although the SG’s brief is very influential and often tracks the court’s ultimate determination, the ultimate decision remains with the court and takes four Justices to vote to hear the case. Nevertheless, this is not a very positive development in the effort to reverse the Ninth Circuit opinion.” ATA expects the Supreme Court to take up CTA’s petition in the next couple of weeks and decide whether it’s going to take up the case by the end of June.
The Scopelitis attorneys, however, said it could take longer. CTA and the State of California had 14 days from the SG’s May 24 brief to file supplemental briefs. “Given the timing, it is possible that the petition will not be considered before the Court recesses for the summer at the end of June, in which case the next currently scheduled conference is October 6,” they said. Meanwhile, the preliminary injunction will remain in effect until the Supreme Court rules on the merits or denies review. Stay tuned!
