What’s the status of AB5 and its possible impact on trucking in California?

It’s been a quiet few months in the battle over whether California’s independent contractor law, AB5, will be applied to trucking in that state. Exactly all of the impact that could entail is not known, but at its most basic, it could mean that a trucking company would either need to stop hiring owner operators or radically change their business model in order to do so. An injunction that has blocked AB5 in the state’s trucking sector could end any day; it could also not end until 2023.

A basic timeline of events for AB5 will help you navigate the issue:

April 30, 2018: The California Supreme Court rules in the Dynamex case that the definition of an independent contractor in California should follow the ABC test. The case began when Dynamex, a parcel delivery company, converted some full-time workers to contractors. By ruling that the ABC test governs the definition of an independent contractor versus an employee, the court creates a looming problem for the trucking industry because of the B prong of the ABC test. The B prong holds that a worker can be viewed as an independent contractor if the worker “performs work that is outside the usual course of the hiring entity’s business.” A trucking company hiring an independent owner-operator to move freight risks running afoul of this provision.

Sept. 18, 2019: California Gov. Gavin Newsom signs AB5 after it passes both houses of the state legislature. AB5 codifies the ABC test into California law.

Dec. 31, 2019: The day before AB5 is to go into effect, a federal district court judge for the Southern District of California finds that AB5 is likely to be superseded by the Federal Aviation Administration Authorization Act, the so-called F4A. That law prevents states from taking action that could affect the “price, route or service” provided by a motor carrier. The case was brought by the California Trucking Association against the state of California. The temporary injunction handed down New Year’s Eve of 2019 becomes a preliminary injunction a few weeks later. It remains in effect. California appeals the injunction. 

Sept. 2, 2020: A three-judge panel for the 9th U.S. Circuit Court of Appeals hears the state’s appeal of the injunction. A consensus develops that the hearing did not go well for the CTA and that the appeals court might overturn the injunction. But it stays in place pending a ruling. 

Nov. 19, 2020: In a case known as Cal Cartage, a state court rules that F4A does not preclude implementation of AB5 in the state. However, given that federal precedent supersedes state law, the decision has no practical impact until the federal case involving AB5 plays out in court. (The U.S. Supreme Court later declines to hear an appeal of the Cal Cartage ruling.)

April 28, 2021: Seven months after the hearing on the state’s appeal, the three-judge panel overturns the injunction. The decision does not immediately put AB5 into effect and it is unclear when it will become governing law for the trucking industry.  The panel, in a 2-1 vote, finds that AB5 is a “law of general applicability” and therefore does not conflict with F4A. Five days later, the CTA says it will appeal the decision to the U.S. Supreme Court and the injunction stays in place.

Nov. 12, 2021: Although only a small percentage of cases appealed to the Supreme Court get review, the CTA appeal, while not being granted full review, at least gets some attention. The Court holds an internal briefing on this date to discuss accepting the appeal of the CTA on the 9th Circuit’s removal of the injunction. 

Nov. 15, 2021: Three days after the conference, the court asks the Justice Department’s solicitor general to weigh in on whether F4A preempts AB5. It does so not just for the CTA case against AB5, but also for a case involving C.H. Robinson and Virgin Airlines. Several attorneys in the transportation and labor law field believe the fact that the court is interested in three separate cases involving F4A preemption bodes well for the CTA appeal. If Supreme Court review is ultimately denied, AB5 would go into effect immediately. 

As of late March 2022, that is where the case stands. There is no deadline for when the solicitor general must submit its opinions on the question of F4A preemption of AB5. Some attorneys have suggested that the issue could easily spill into the 2022-2023 term, which begins this October. If a decision is not handed down by the Supreme Court before the current term’s close of deliberations at the end of June, the trucking industry may be looking at late 2022 or early 2023 to resolve the issue that stretches back to the California Supreme Court Dynamex decision in early 2018.

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