Recent months have seen little movement in the dispute over whether California’s independent contractor statute, known as AB5, would be applied to commercial trucks. Although it is unclear what exactly the ramifications of this could be, at the most basic level, it could imply that a trucking firm would be forced to either stop recruiting owner-operators or drastically alter their business model to remain competitive. An injunction that has prevented the implementation of AB5 in the state’s transportation industry could be lifted at any time, or it could last until 2023.
The following is a general timeline of events for AB5 to assist you in navigating the situation:
30th of April, 2018: In the Dynamex case, the California Supreme Court determines that the definition of an independent contractor in California should be based on the ABC test rather than the traditional definition. The lawsuit began when Dynamex, a parcel delivery company, decided to convert some of its full-time employees into independent contractors. Because of the B prong of the ABC test, the court’s decision that the ABC test dictates the definition of an independent contractor vs. an employee raises a potential dilemma for the trucking business, which is already experiencing difficulties. The B prong of the independent contractor states that a worker can be considered an independent contractor if the person “performs work outside the regular course of the hiring entity’s business.” Trucking companies that hire independent owner-operators to transport freight face the danger of falling foul of this provision in their contracts.
California Gov. Gavin Newsom signed Assembly Bill 5 after it passed both houses of the state legislature on September 18, 2019. California Assembly Bill 5 codifies the ABC exam into state law.
AB5 is set to take effect on January 1, 2020. However, a federal district court judge for the Southern District of California concludes that AB5 is likely to be superseded by the Federal Aviation Administration Authorization Act, also known as the F4A, on December 31, 2019. As a result of this regulation, states are prohibited from taking actions that could impact the “pricing, route, or service” supplied by a motor carrier. The California Trucking Association filed a lawsuit against the state of California, and the case is now pending. Approximately three weeks after the temporary injunction was issued on New Year’s Eve in 2019, it was converted into a preliminary injunction. It continues to be in effect. California has filed an appeal against the request.
The state’s appeal of the injunction will be heard on September 2, 2020, by a three-judge panel of the 9th Circuit Court of Appeals in Washington, D.C. The general assumption is that the CTA’s hearing did not go well and that the appeals court may reverse the injunction if the case goes to trial. However, it remains in effect until a decision is reached.
The 19th of November, 2020: Cal Cartage is a case in which a state court ruled that the First Amendment does not bar the adoption of AB5 in the state. However, because federal precedence outweighs state law, the ruling will have no practical consequence until the federal issue concerning AB5 is resolved in court, which would take several months. The United States Supreme Court turned down a further appeal of the Cal Cartage decision.
A three-judge panel overturns the injunction against the state on April 28, 2021, seven months after the hearing on the state’s appeal. AB5 is found to be a “law of broad applicability” by the panel, which rules that it does not contradict F4A. The panel rules 2-1 in favor of this conclusion. There will be no immediate consequence from the ruling, and it is unclear when it will become the law that governs the transportation business due to the decision. Five days later, the CTA announced that it would appeal the verdict to the United States Supreme Court, and the injunction remained in effect until further notice.
12th of November, 2021: The CTA appeal, while not receiving complete scrutiny, does receive some attention, although only a small number of cases appealed to the Supreme Court are reviewed. On this date, the Court will hear an internal briefing to determine whether or not to accept the CTA’s appeal of the 9th Circuit’s decision to remove the injunction.
Nov. 15, 2021: Three days after the conference, the court requests the opinion of the Justice Department’s solicitor general on whether the First Amendment preempts the Fifth Amendment. If the Supreme Court ultimately rules that AB5 should not be implemented, it will take effect immediately. In addition to the CTA’s complaint against AB5, it is also involved in a dispute involving C.H. Robinson and Virgin Airlines, among others. Some transportation and labor lawyers believe that the court is taking an interest in three different instances concerning F4A preemption speaks well for the CTA’s ability to succeed on its appeal.
As of late March 2022, that is the current state of the lawsuit. There is no set timeframe by which the Solicitor General must submit their opinions on the F4A preemption of AB5 to the government. Some attorneys have speculated that the matter might easily extend into the 2022-2023 term, which begins in October 2018. If the Supreme Court does not deliver a judgment before the current term’s discussions come to a close at the end of June, the trucking industry may have to wait until late 2022 or early 2023 to address the issue that dates back to the California Supreme Court’s Dynamex decision in early 2018.
