Truckers may be misclassified as contractors, court rules

Truck drivers in Southern California are not exempt from the "ABC" test set forth in Assembly Bill 5 and may have been misclassified as independent contractors, a state court of appeal ruled. The opinion overturned a lower court's ruling that the test is preempted by federal law.

Under the Federal Aviation Administration Authorization Act, states cannot issue laws that impact the prices, routes, or services of motor carriers - or trucking companies - that are transporting property. The core question addressed by the court of appeal's three-justice panel was whether the federal law preempts California's application of the "ABC" test to truck drivers working with federally licensed interstate motor carriers.

"The defendants offered no evidence, and the trial court made no factual findings, concerning the impact, if any, of application of the ABC test on motor carriers' prices, routes, and services," wrote 2nd District Court of Appeal Justice Brian S. Currey. People v. Cal Cartage Transportation Express, LLC, B304240 (Cal. App. 2nd Dist. Feb. 18, 2020).

The defendants - CMI Transportation LLC, K&R Transportation California LLC, and Cal Cartage Transportation Express LLC - are three of the largest trucking companies in the Port of Los Angeles, according to a statement released by Los Angeles City Attorney Mike Feuer on Friday. In their arguments before the court, the trucking companies said the "ABC" test impacts their prices, routes, and services because trucking companies cannot pass the test's "B" prong, which requires workers to perform work that is outside the usual course of a hiring entities' business in order to qualify as independent contractors.

"The ABC test is a law of general application. The ABC test does not mandate the use of employees for any business or hiring entity," Currey said. "Instead, the ABC test is a worker-classification test that states a general and rebuttable presumption that a worker is an employee unless the hiring entity demonstrates certain conditions. That independent owner-operator truck drivers, as defendants currently use them, may be incorrectly classified, does not mean the ABC test prohibits motor carriers from using independent contractors. The ABC test, therefore, is not the type of law Congress intended to preempt."

The issue of whether Assembly Bill 5 is preempted by the Federal Aviation Administration Authorization Act has been addressed in a number of cases across the state, including a federal case pending before the 9th U.S. Circuit Court of Appeals. In January, a federal district judge granted the plaintiffs - the California Trucking Association - the state's first preliminary injunction barring enforcement of Assembly Bill 5 on motor carriers. California Trucking Association v. Becerra, 20-55106 (9th Cir., filed Jan. 29, 2020).

"This is a significant step for hundreds of hardworking drivers in and around the port whom we allege are employees, yet are systemically and unlawfully classified as independent contractors," said Feuer in a statement Friday. "The misclassification we allege may boost trucking companies' bottom lines, but it kicks these drivers in the teeth by requiring them to pay outrageous expenses just to do their jobs. It's wrong and that's why we're fighting."

Joshua S. Lipshutz, a partner at Gibson, Dunn & Crutcher LLP who represents the trucking companies, said in a statement, "The Court of Appeal failed to appreciate the many ways in which California's worker classification law impedes the trucking industry, not only in California but nationwide.

"Federal law prohibits states from enacting these types of laws and protects the independence of owner-operator truck drivers," he added. "We intend to appeal the court's decision."