Trucking got a temporary reprieve from California’s AB5, a new law in effect Jan. 1 severely limiting the ability to use independent contractors. In the final hours of New Year’s Eve, U.S. District Judge Roger Benitez issued a temporary restraining order preventing state officials from enforcing the law against motor carriers.
The California Trucking Association in November had filed a lawsuit challenging Assembly Bill 5, which put into place a stringent “ABC test” for determining the validity of independent contractor relationships. Because one of the requirements, the “B prong,” prohibited companies from using independent contractors unless the worker was performing work “outside the usual course of the hiring entity’s business.”
CTA contends in its lawsuit that AB 5 is preempted by the supremacy and commerce clauses in the U.S. Constitution and is in direct conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994. (Part of the FAAAA bans states from enacting laws that affected a motor carrier's prices, routes and services.)
On Dec. 24, CTA filed a motion for temporary restraining order, seeking to keep the state from enforcing AB5 as it relates any motor carrier operating in California, pending the court’s resolution of its previous motion for a preliminary injunction, which is set for hearing on Jan. 13.
Judge Benitez granted the temporary restraining order. In a five-page decision, he wrote that the association had showed the case was “likely to succeed on the merits” and that the plaintiffs are “likely to suffer irreparable harm in the absence of relief.”
“AB 5 threatens the livelihood of more than 70,000 independent truckers,” said CTA CEO Shawn Yadon when the lawsuit was first filed. “The bill wrongfully restricts their ability to provide services as owner-operators and, therefore, runs afoul of federal law.”
In response to the Dec. 31 restraining order, Yadon told HDT in an email, "The California Trucking Association appreciates the court for recognizing the harm AB 5 poses to trucking. We can protect workers without crushing independent truckers in the process."
The Harbor Trucking Association, representing intermodal carriers operating in California’s ports, has been a supporter of the CTA’s efforts. “From day one, we felt there was a great argument for federal preemption of AB 5 for interstate trucking,” Weston LaBar, executive director of HTA, told HDT in response to the temporary injunction. “The California Trucking Association has done a great job leading these legal efforts on behalf of the entire trucking industry in California. This ruling was the first step in a long journey that we ultimately feel will exempt trucking from AB 5 and put this misclassification issue to rest one and for all.”
As HDT reported just hours before the ruling, even on the eve of the law taking effect, there was still immense uncertainty about how AB5 would be enforced – and given lawsuits such as CTA’s and others, how long it will remain law in its current form.
That uncertainty has led to some trucking companies, especially in the drayage arena, taking a wait-and-see attitude, gambling that the legal challenges will be successful before they get hit with any enforcement actions.
HTA's LaBar told HDT in an interview Dec. 31 before the ruling came down that many of HTA’s members area holding off making any major changes to comply with the new law, because there is both litigation challenging AB5 in court and the potential for changes in the law in the state legislature. “No one wants to go down the arduous and expensive task of reclassifying drivers and changing their business model only to find that AB5 doesn’t apply,” he said.
Rail Delivery Service in Fontana, California, is one company that says it’s staying with its traditional owner-operator model until they see how litigation turns out – but that doesn’t mean company officials haven’t been researching contingency plans. “Our message to our drivers and to our customers is that we’re going to keep our model the same,” RDS CEO Greg Sanders told HDT in an interview. “But we know we have to be very fluid in our thinking and have a Plan B in place.”