By: Michael Mantovani, Esq. and Kristen MJ Johnson, Esq.

The trucking industry continues to watch California carefully as the state’s labor offices prepare to begin enforcement of AB5, the law governing limitations on the hire of independent contractors. On August 24, 2022, California’s Employment Development Department (“EDD”) and the Department of Industrial Relations’ Labor Commissioner’s Office provided detailed information about their expected enforcement of AB5 in the trucking industry. Our firm was in attendance at the conference, as part of its involvement in the California Trucking Association (“CTA”).

The EDD emphasized that failure to employ workers interferes with timely benefit payments, triggers audits and investigations, and results in restitution, additional taxes, penalties, and interest. AB5, the EDD noted, has a strict 3-part test called the “ABC” test, and if companies fail this test in hiring independent contractors, they could be found to have misclassified their employees and be subject to enforcement actions.

At the meeting, the EDD discussed the impact of the decision by the 9th Circuit in California Trucking Association v. Bonta. 996 F.3d 644 (9th Cir. 2021), which is now on remand with the federal District Court after the U.S. Supreme Court denied hearing of the appeal. In Bonta, the CTA, along with two independent owner-operators, filed a lawsuit against the California Attorney General and several other California officials, seeking a declaration that the Federal Aviation Administration Authorization Act of 1994 (“F4A”) preempted the ABC test as applied to motor carriers. The District Court issued an injunction, holding that it was likely that FAAAA would preempt the enforcement of AB5 as it relates to independent contractor drivers in the trucking industry. The Ninth Circuit disagreed, reversing the District Court and finding that “[b]ecause AB-5 is a generally applicable labor law that impacts the relationship between a motor carrier and its workforce, and does not bind, compel, or otherwise freeze into place a particular price, route, or service of a motor carrier at the level of its customers, it is not preempted by the F4A.” Id. at 664. Accordingly, the Ninth Circuit held that “[b]ecause CTA is unlikely to succeed on the merits, the district court erred by enjoining the state from enforcing AB-5 against motor carriers operating in California.” Id.

Note, as of this week, the District Court lifted the injunction and AB5 is now in full effect in the trucking industry. The CTA has released additional details about how this is expected to impact the trucking industry and the steps they are taking to limit the detrimental effects of AB5 in the industry. Below is a recent alert on AB 5 from the California Trucking Association. Visit their website at www.caltrux.org/ab-5-faq/ for more details.

We will continue to monitor the situation and any further enforcement notices from the state agencies. We work closely with our clients doing business in California on these issues.

August 29, 2022

AB 5 Update

CTA Members,

Today, the Southern District Court of California held a hearing on CTA v. Bonta, the Association’s case on AB 5.

Below are the highlights:

• Judge Benitez formally dissolved the 2020 preliminary injunction restricting enforcement of AB5 against motor carriers.

• CTA’s counsel and the State/Teamsters briefed the judge on motions each party intends to file. As we informed the membership last week, CTA’s counsel will file a new motion for preliminary injunction sometime in October. We expect a hearing on the motion will take place late this year or early 2023.

• Judge Benitez lifted an earlier dismissal of CTA’s dormant commerce clause claim.

• The Judge will consider a motion to intervene by OOIDA on behalf of CTA.

Please contact CTA’s Senior Vice President of Government Affairs Chris Shimoda for any questions.

Thank You,

Eric Sauer
Chief Executive Officer
California Trucking Association