Federal Judge Blocks Enforcement of California AB 5 Against Trucking Industry

On January 16, 2020, a federal judge for the U.S. District Court, Southern District of California issued a preliminary injunction to block the State of California from enforcing Assembly Bill 5 (“AB 5”) against trucking companies who use independent contractor drivers. [1] The Court reasoned that California encroached upon Congress’s legislative authority and intent to deregulate the motor carrier industry. Therefore, the ABC Test is preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The Court also adopted the Los Angeles Superior Court’s reasoning in a separate case. [2]

AB 5 presumes that all workers are employees, codifies the strict ABC Test, and places the burden of proof on hiring entities to establish that their workers are properly classified. AB 5’s effect is broad and far-reaching—it affects almost every sector of California’s economy. As we predicted, AB 5 has led to much confusion, and various industry groups are now filing lawsuits to block the law’s application or gain clarity on its application.

For now, the Court’s ruling means that roughly 70,000 truck drivers who operate in California as independent contractors will not be subject to AB 5, most likely until the issue makes its way through the Ninth Circuit Court of Appeals and possibly the Supreme Court. This is a big win for the California Trucking Association and trucking industry companies.

The injunction against AB 5 does not apply to other industries, at least not yet. A federal judge in Los Angeles recently refused to temporarily exempt freelance journalists and photographers from AB 5, even though their case is still pending. Other high-profile lawsuits have been filed against the State of California, including suits by Uber and Postmates. In the meantime, companies struggle to understand the law and limit their liability.

The applicability of AB 5 to various industries is uncertain. However, it remains imperative for employers who maintain independent contractor relationships to consult with employment counsel and minimize potential liability. Misclassification of employees carries significant exposure—damages include unpaid wages, minimum wage violations, unpaid overtime, unpaid meal and rest breaks, waiting time penalties, interest, attorneys’ fees, and potential civil penalties per violation.

Leech Tishman’s Employment Practice Group can help clients ensure compliance with California’s complex and technical employment laws and can assist clients with defending against civil or administrative actions.

If you have any questions about California Assembly Bill 5 or need guidance on California or federal employment laws, please contact Eric J. Wu. Eric is a Partner in Leech Tishman’s LAX office, which is located in El Segundo, California. He practices in the firm’s Employment, Litigation, and Corporate Practice Groups. He can be reached at 424.738.4400 or ewu@leechtishman.com.

Leech Tishman’s Facebook Page: https://www.facebook.com/leechtishman

Leech Tishman’s Twitter: https://twitter.com/LeechTishman

Leech Tishman’s Company Page on LinkedIn: https://www.linkedin.com/company/leech-tishman

Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, internal investigations, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in El Segundo, CA, Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.

[1] California Trucking Association, et al. v. Attorney General Xavier Becerra, et al., Case No. 3:18-cv-02458 (S. D. Cal., January 16, 2020).

[2] On January 8, 2020, the Los Angeles Superior Court ruled that the ABC Test is preempted by the FAAAA. The Court found that the ABC Test effectively prohibits motor carriers from using independent contractors to provide transportation services, thereby causing an impermissible effect on motor carriers’ prices, routes, and services. The People of the State of California v. Cal Cartage Transportation Express LLC, et al., Case No. BC689320 (Los Angeles Superior Court, January 8, 2020).