Labor & Employment Law Daily Court dismisses some of trucking association’s challenges to California AB 5, but injunction remains
Friday, February 14, 2020

Court dismisses some of trucking association’s challenges to California AB 5, but injunction remains

By Wayne D. Garris Jr., J.D.

In the latest installment of California’s AB 5 saga, the court affirmed its holding that the FAAAA likely preempts AB 5 and rejected the CTA’s other challenges.

Granting in part and denying in part the State of California’s and Teamsters’ motion to dismiss, a federal district court in California held that the California Trucking Association had previously established a likelihood of success on its claim that the Federal Aviation Administration Authorization Act (FAAAA) preempted AB 5 when it moved for a preliminary injunction, so that same claim would survive the defendant’s motion for dismissal. The court, however, dismissed the plaintiffs’ claims that AB 5 violated the dormant Commerce Clause and was preempted by a Federal Motor Carrier Safety Administration (FMCSA) order. In a separate order, the court rejected an attempt by defendant-intervenor, International Brotherhood of Teamsters, to stay enforcement of the January 16 preliminary injunction, finding that the intervenor failed to provide any evidence to meet the court’s four factor test to determine whether to stay an injunction (California Trucking Association v. Becerra, February 10, 2020, Benitez, R.).

CTA business model. The California Trucking Association is an association of motor-carrier companies in California. Most of CTA’s members contract with an owner-operator of a truck to provide transportation of property in interstate commerce. Individual owner-operators typically buy or lease their own trucks, then work for themselves to build up their experience and reputation in the industry.

Independent contractor standard. For nearly three decades, California courts used the test established in S.G. Borello & Sons, Inc. v. Department of Industrial Relations to determine whether workers are correctly classified as employees or independent contractors. The Borello standard considered the “right to control work,” as well as other factors. In April 2018, the California Supreme Court, in Dynamex Operations West, Inc. v. Superior Court, replaced the Borello standard with the “ABC test.” California’s Assembly Bill 5 (AB 5) codified the “ABC test” and expanded its reach. Under AB 5’s ABC test, in the trucking industry, an owner-operator is presumed to be an employee unless the motor carrier establishes three requirements:

A. 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.
B. The person performs the work that is outside the usual course of the hiring entity’s business.
C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Case history. AB 5 went into effect on January 1, 2020. On December 2, 2019, the plaintiffs filed their motion for a preliminary injunction. The court granted a temporary restraining order and enjoined the state from enforcing AB 5 as to any motor carrier operating in California until resolution of the plaintiffs’ motion for preliminary injunction. On January 16, 2020, the court granted the plaintiffs’ motion for a preliminary injunction finding that they established a high likelihood that AB 5 would be preempted by the FAAAA.

Motions to dismiss. The State of California and the Teamsters, as an intervenor, moved to dismiss the CTA’s complaint for lack of subject matter jurisdiction and failure to state a claim under Rule 12(b)(6).

Pre-enforcement injury. The court quickly dismissed the defendants’ argument that the CTA lacked standing because its “pre-enforcement” injury was speculative. Citing the Supreme Court’s decision in Susan B. Anthony List v. Driehaus, the court noted that “when an individual is subject to [the threatened enforcement of a law], an actual arrest, prosecution, or other enforcement action is not a prerequisite to challenging the law.”

Associational standing. Nor was the court persuaded by the Teamsters’ argument that the CTA lacked associational standing. CTA plausibly alleged that many of its members regularly contracted with independent contractors but can no longer do so. It was not necessary at the motion to dismiss stage for CTA to provide the identities of specific members.

Individual plaintiffs. The Teamsters’ lastly argued that the individual plaintiffs lacked standing because they falsely claimed that they can no longer “lawfully contract as individua owner-operators.” The court again rejected this argument noting that at the pleading stage, the plaintiff’s factual allegations are taken as true. The Teamsters’ challenge to the plaintiffs’ factual allegations should be raised at the summary judgment stage.

Judicial discretion. Lastly, the court declined the defendants’ request that it exercise its discretion not to hear the case. The court concluded that the case turns on federal preemption, not state law issues; there was no evidence of forum shopping; and the court’s ruling would likely reduce duplicative litigation. Thus, resolution by this court was appropriate.

FAAAA preemption. The defendants moved to dismiss the plaintiffs’ FAAAA preemption claim based on the same arguments that it raised in response to the plaintiffs’ request for a preliminary injunction. The court again denied the motion, finding that the plaintiffs established a likelihood of success on the merits of their FAAAA preemption claim. Specifically, the Ninth Circuit’s precedent suggests that the FAAAA likely preempts “an all or nothing” state law like AB 5 that categorically prevents motor carriers from exercising their freedom to choose between independent contractors or employees.

Dormant Commerce Clause. The court granted the defendants’ motion to dismiss the plaintiffs’ claim that AB 5’s ABC test violates the dormant Commerce Clause. While the dormant Commerce Clause prohibits states from disrupting interstate commerce, the court may only review a state law when “Congress has not acted or purported to act.” Here, Congress has acted through the FAAAA’s provision that preempts all state laws that “relate to a price, route, or service of any motor carrier with respect to the transportation or property.” Since Congress had already exercised its Commerce Clause power in this area, there was no need for the dormant Commerce Clause to protect Congress’ unexercised power.

FMCSA Preemption. The FMCSA published an order concluding that California’s meal and rest period rules were preempted by federal law as applied to drivers of “property-carrying commercial motor vehicles subject to FMCSA’s Hours-of-Service regulations.” The plaintiffs argued that the order should be enforced against AB 5 because the same federal law that preempted the meal and rest period rules provides that “a State may not enforce a State law or regulation on commercial motor vehicle safety that the Secretary of Transportation decides under this section may not be enforced.” Rejecting this argument, the court held that neither the FMCSA nor the Supremacy Clause creates a private right of action for preemption claims. Lastly, the plaintiffs could not state a claim to enforce the FMCSA order because “enforcing the decision would offer no relief beyond the decision itself.” The court granted the defendants’ motion to dismiss as to the FMCSA preemption claim.

Motion to stay. In a separate order, the court denied the Teamsters’ motion to stay the court’s order granting the plaintiff’s motion for a preliminary injunction. It considered four factors to determine whether a stay is warranted: “(l) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and ( 4) where the public interest lies.”

The Teamsters failed to persuade the court to stay the injunction. First, it offered no new evidence to compel the court to reconsider its conclusion that the plaintiffs showed a likelihood of success on the merits of its FAAAA preemption claim. Second, the Teamsters argued that the state would suffer irreparable injury absent a stay but failed to show how it would suffer irreparable injury. Lastly, the Teamsters offered conclusory statements, without evidence, that the stay would not injure other parties and was in the public interest. This was insufficient, according to the court.

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