In January, a federal judge has put in a temporary block for truck drivers being classified as employees under California’s AB5 law. There are 70,000 independent truckers in California who work for federal trucking companies.
What Is AB5?
AB5 was a California state bill which came into effect on the 1st of January 2020. It seeks to ensure all workers are correctly classified as employees or independent contractors. To classify employees, companies have to use the ABC test. If the worker passes all three requirements, they can be classified as an independent contractor. The ABC test is as follows:
- The company does not control or direct how the worker performs the work, either directly or through a contract.
- The duties of the worker are outside the normal scope of the company’s business.
- The worker has their own trade or business where they routinely carry out the work they are doing for the company.
Under the ABC test, a trucking company would have to classify independent truckers as employees as it is the entire scope of their business. As an employee, the truckers would be entitled to minimum wage and benefits such as sick leave and workers compensation.
In November, the California Trucking Association challenged AB5 through a lawsuit. Their lawsuit stated:
- The US Constitution’s supremacy clause and commerce clause pre-empt AB5. The commerce clause gives Congress the power to regulate business and trade between states and other countries. The supremacy clause says that federal law overrules any conflicting state laws. As a trucking company deals with movement between states, the lawsuit argues that AB5 does not apply to trucking companies as it is overruled by the Constitution.
- AB5 is in conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994. These acts ban states from passing laws that will affect motor carriers’ routes, pricing, and services.
- Individual truckers would have to abandon their trucks and the right to set their own schedules if trucking companies needed to comply with AB5. Some truckers have invested up to $150,000 in clean trucks.
As a result of the lawsuit, a preliminary injunction was placed by the U.S Southern District Court. The injunction states that California state officials cannot enforce AB5 against motor carriers. This injunction will be in place until the trial for the California Trucking Association’s lawsuit.
The Borello Test
Before AB5, the way to classify if workers were employees or independent contractors was the Borello Test. Therefore, with the injunction, trucking companies will use the Borello Test until the trial.
The Borello test considers many different factors, such as:
- The skill required
- Amount of supervision required
- If the worker is involved in a distinct role or business
- If the worker supplies the tools necessary to perform their duties
- The duration of services
- How the worker is paid
- If there is an employer-employee relationship
- If the work is a key role of the regular business of the company
Judge Benitez, when giving the court’s decision, said that California had clearly encroached on Congress’ territory. AB5 seeks to take away the motor carriers’ choice to be able to use independent contractor drivers. Congress’ intent is to deregulate interstate trucking instead of having companies in a difficult position of trying to comply with varied state regulations.
What Happens Now?
The state is expected to ask for a stay of the injunction while they appeal. This means that they are asking permission to enforce AB5 while they appeal the lawsuit. The state would have to prove many things such as they have a high chance of success and that there would be damages without a stay. As there is an alternative test for California, the Borello test, the stay of injunction is unlikely to be granted. However, the discretion to reverse the order, affirm it, or ask for further information lies with the Ninth Circuit.
Because the California Trucking Association has been awarded a preliminary injunction by Judge Benitez, this means that one of their challenges creates serious questions or they are expected to win their case. In his decision, Judge Benitez said that the Federal Aviation Administration Authorization Act has broad preemption provisions against state laws putting restrictions on motor carriers. His notes said that under the ABC test, motor carriers can only work with independent contractors if they are classed as employees. While this does not prevent motor carriers from using independent contractor drivers, it does place contract restrictions on the practice.
Port Truck Drivers Want to Be Classified as Employees
Port truckers have been vocal in the whole debate about independent contractors versus employees. Currently, they are wrongly classified as independent contractors according to Teamsters union. Currently, with the injunction and potential for changes in the state law, many companies are waiting to see what happens. The Teamsters union is arguing that regardless of what happens in court, port truck drivers have been misclassified for a long time, regardless of if the Borello Test or ABC test is used. They have had previous successes in court challenging the classification of port drivers under the Borello Test in wage theft cases. In every case, California port truck drivers have been proved as employees, not independent contractors. Teamsters union is arguing that the injunction does not apply to port truck drivers, so Harbor Trucking Association Members should reclassify their workers without delay.
Brad Nakase, Attorney