A federal appeals court panel in San Francisco has rejected a lower court’s injunction and ruled that California Assembly Bill 5, also called the “gig worker” law, applies to the trucking industry in California. A state trucking lobby group now seeks a full court ruling related to the new law, which says companies hiring independent contractor drivers must consider them employees, with a few exceptions — including construction.
The California Trucking Association filed the suit, claiming motor carriers have a federal preemption from the law, which took effect on Jan. 1, 2020.
“While it is possible that there will be an appeal to the U.S. Supreme Court, the injunction awarded by the district court has been lifted,” says Hillary Baca, a San Francisco labor & employment attorney at Nixon Peabody LLP. “California is free to prosecute cases against commercial trucking companies if they continue to classify drivers as independent contractors. If trucking companies opt to reclassify drivers as employees, they will likely face an uptick in costs and administrative burdens. It’s a no-win situation for them.”
Construction operates under the law's industry trucking exemption, which is in effect until Jan. 1. AGC of California says it supports AB 1561, which seeks to extend the exemption until Jan. 1, 2025, and will provide more thorough analysis of the April 28 appellate court decision in the near future.
AB5 says, in part, that contractors can do business with a trucking subcontractor if it:
- is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation
- is registered with the Department of Industrial Relations as a public works contractor for work performed after Jan. 1, 2020
- uses its own employees to perform construction trucking services
- negotiates and contracts with, and is compensated directly by, the licensed contractor
The preliminary injunction, which the appellate court reversed, had blocked California from enforcing the law on motor carriers and independent owner-operators conducting business in the state.
“We continue to stand by our initial claim that the implementation of AB 5’s classification test is preempted by federal law and is clearly detrimental to the long-standing and historical place California’s 70,000 owner-operators have had in the transportation industry,” said Shawn Yadon, chief executive of the California Trucking Association, in a news release.
Under the law, employers must now use an "ABC test" to prove that workers are independent contractors. A worker is considered an independent contractor if 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; the worker performs work outside the usual course of the hiring entity’s business; and the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed."