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California has filed its legal arguments opposing the request for a preliminary injunction that would block imposition of independent contractor law AB5 in the state’s trucking sector and was able to cite developments in the sector since the law went into effect last year.
Both the California Trucking Association (CTA) and the Owner-Operators Independent Drivers Association (OOIDA) are plaintiffs in the suit to stop AB5 from being implemented in the trucking industry in the state. CTA filed the original suit in 2018. That led to an injunction issued New Year’s Eve 2019, the day before the law broadly went into effect in the state, that AB5 could not be implemented in the state’s trucking sector because it was in conflict with a federal law known as F4A.
That injunction was overturned in April 2021 by the 9th Circuit, but the lifting of it stayed while the CTA pursued an appeal before the Supreme Court. The Supreme Court denied review on June 30, 2022, and AB5 became the law of the land.
The original suit, never having been fully adjudicated, was kicked back to the original lower court. OOIDA has been added as a plaintiff. Both CTA and OOIDA have asked for a new injunction.
The attorney general’s office, headed by lead defendant in the case Attorney General Rob Bonta, filed responses to both the CTA and OOIDA injunction requests. There is significant overlap both in the plaintiffs’ arguments and the state’s response.
Robert Rogison, outside counsel for CTA, said CTA’s and OOIDA’s briefs in response to the state’s filings are due July 14. A hearing on the request for injunctions from both CTA and OOIDA is set for Aug. 28 in the courtroom of Federal District Court Judge Roger Benitez, who handed down the original New Year’s Eve 2019 injunction.
With AB5 in place for almost a year, it did allow the California attorney general’s brief to cite developments in the past year that it said showed AB5 would not be the wrecking ball to the state’s trucking industry argued by CTA and OOIDA. It also was able to cite what the 9th Circuit said when it overturned the original injunction.
For example, the state could — and did — say things such as “plaintiffs rehash arguments the Ninth Circuit has rejected.” California also has the ability now to seek to rebut the CTA’s argument that AB5 would result in increased costs. The state noted that the 9th Circuit had already said the CTA’s argument about costs was not enough to support its argument that imposing AB5 on the trucking sector was in violation of the Federal Aviation Administration Authorization Act, the law known as F4A. And with AB5 in place, it allows the state to argue that the CTA “cannot cite any material differences that would support a different result today.”
Referring to protests at the Port of Oakland that developed after AB5 went into effect, the state said, “There is no evidence that these protests have had lingering effects or have continued. To the contrary, the ports have reopened for business.”
It also cited an increase in data from the Federal Motor Carrier Safety Administration that showed the number of drivers in California rose significantly, to about 876,000 from 813,000. The time frame for that comparison was not disclosed in the brief but the increase would have followed a national trend that in 2021 and early 2022 showed a significant increase in the number of motor carrier authorities granted by FMCSA.
The state also cited companies, without identifying them, where “motor carriers have reclassified drivers as employees [and] have continued to operate.” A move by Universal Logistics (NASDAQ: ULH) last year to take that step was one of the more notable, in part because Universal’s position as a publicly traded company meant the switch was announced.
Documents filed by CTA written by trucking industry officials in support of the request for an injunction are vague, the state said. One said that independent contractors at the company whose executives filed the brief are not willing to work as employees. But the state said the filing lacked information on the terms of the offer to switch to full time, “notwithstanding the fact that AB5 has been in effect for nearly a year.”
“Courts have rejected … self-serving conclusory declarations” in requests for preliminary injunctions, the state said.
California also argued that the business-to-business exception can be utilized by carriers wishing to keep independent owner-operators as contractors. The B-to-B exception is a 13-point pathway that needs to be met fully on each of the baker’s dozen of requirements, with no leeway for failing to meet one or two mandates. Trucking industry executives generally have scoffed at the idea that the exception is a legitimate way of using independent contractors as drivers, believing the test is too difficult to meet.
Between the two responses, one to the CTA action and the other to OOIDA, the state made several other arguments.
— The argument that AB5 would impact “prices, routes and services,” which F4A says cannot be impacted by a station action, is not enough to overturn the law for trucking, California said. The state quoted an earlier precedent that said requiring a motor carrier to “take into account a state regulation in its planning services is not sufficient to require FAAAA preemption, as long as the law does not have an impermissible effect, such as binding motor carriers to specific services.”
— The CTA lost already at the 9th Circuit. “The Ninth Circuit recognized … carriers can continue to work with owner-operators, much as they do now, by treating them as employees,” the state said.
— OOIDA’s central argument did not focus on the issue of F4A. Instead, it is primarily concerned with the question of whether AB5 runs afoul of the Commerce Clause of the U.S. Constitution, which limits a state’s ability to take action that could impact interstate commerce. That was in the original CTA lawsuit as well but was not part of the basis for the 2019 injunction. The state’s argument goes back again to the 9th Circuit’s decision to overturn that decision. The three-judge panel already rejected the argument that “the legislative history of the F4A … [has] nothing in the background materials reflecting a Congressional intent to preempt the traditional authority of states to protect employees.” Separately in its response to OOIDA, the state said, “The Commerce Clause does not protect a party’s preferred business model or preferred methods of operation in a given marketplace.”
— The long list of exemptions granted to various industries from AB5 enforcement, which at times can seem random, has been cited by CTA and OOIDA as proof the trucking industry was “singled out” by the law’s author, former Assemblywoman Lorena Gonzalez. California repeats the finding of the 9th Circuit that AB5 is a “law of general applicability,” applying to “hundreds of different industries.” The patchwork of exemptions that ended up with trucking not getting any sort of relief came after the state Legislature “considered the history of misclassification in particular occupations, noting that such misclassification is particularly rampant in certain industries, including the trucking industry.”
AB5 uses a three-pronged test known as the ABC test to guide regulatory and legal questions regarding the status of whether a worker is an independent contractor or an employee. The B prong of the ABC test is particularly problematic for the trucking industry, as it says an independent contractor “performs work that is outside the usual course of the hiring entity’s business.” That is a challenge for a trucking company that hires independent owner-operators.
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