The California Trucking Association (CTA) will appeal its challenge to California Assembly Bill 5, or AB 5, to the U.S. Supreme Court. The suit was recently overturned by the 9th U.S. Circuit Court of Appeals.
AB 5 is a statewide independent contractor law that adopts the “ABC test” for determining whether a worker must be treated as an employee. The CTA’s 2018 lawsuit maintains that the law “effectively prohibits motor carriers from using independent contractor drivers.”
Under the ABC test, the following must be true for a person to be considered an independent contractor:
- The person 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 performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Although the aim of the law, which was signed in 2019, is to protect state gig workers according to California’s labor laws, the CTA argues that it limits trucker’s entrepreneurial freedoms and would be detrimental to the more than 70,000 independent owner-operators in California. A 2015 study by the CTA found that owner-operators earned about 40% more ($59,478) than the median for company drivers ($42,087), based off 2013 data.
“If the [AB 5] mandate issues, then CTA’s members will have to restructure their businesses to comply with AB 5, risk severe civil and even criminal sanctions, or cease doing business due to the financial inability to purchase equipment and hire employee drivers,” the association stated. The CTA added that owner-operators who have offered their services as independent contractors will either have to close their businesses to become employees or cease working in California.
Those in favor of AB 5 argue that drivers need greater legal protections that are not available to independent contractors.
“Unemployment benefits, disability benefits and sick leave benefits—which require an employee status determination—are critical to misclassified drivers whose employers force them to pay unlawful deductions and make truck payments even when they are not working, while denying them employer-provided health and sick leave benefits,” said Ron Herrera, Teamsters International vice president and director of the Port Division.
AB 5 was supposed to go into effect on January 1st of this year, but a district court judge stayed the decision due to CTA’s challenge to the law, which the court believes that the CTA has a “good chance” to prevail in.
The Supreme Court’s review of the case is due on or before November 18, 2021, where it will ultimately determine if the Federal Aviation Administration Authorization Act of 1994 preempts the use of AB 5’s ABC test.
Other trade organizations such as the American Trucking Associations, which represents motor carriers and independent owner-operators, are in favor of CTA’s challenge to the law.
“We are hopeful that the Supreme Court will ultimately not only take the case, but will see the wisdom of CTA’s argument and reverse the 9th Circuit’s ruling,” said ATA spokesman Sean McNally.