On January 13, 2020, U.S. District Court Judge Roger T. Benitez left in place a temporary restraining order (TRO) enjoining the enforcement of California’s Assembly Bill (AB) 5 as to motor carriers operating in California. The U.S. District Court for the Southern District of California issued its original TRO on December 31, 2019, the eve of AB 5’s effective date of January 1, 2020. In its TRO, the court agreed with the California Trucking Association (CTA) that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) likely preempts part of AB 5’s new independent contractor test. The court found that CTA met its burden for a temporary restraining order and enjoined the State of California from enforcing AB 5 as to any motor carrier operating in California, pending resolution of CTA’s motion for a preliminary injunction. The hearing on CTA’s motion for preliminary injunction took place on January 13, 2020.
At the hearing on CTA’s motion for preliminary injunction, the parties presented arguments to the court concerning whether CTA was likely to prevail on the merits of its claim that the FAAAA preempted the second prong of the ABC test adopted in AB 5 and related issues. Following the oral argument, the court took the matter under submission and stated that the TRO would remain in place pending the court’s ruling on the preliminary injunction motion.
AB 5, which took effect on January 1, 2020, codified the 2018 Supreme Court of California decision establishing a new test to determine whether a worker is an independent contractor or an employee. In addition to codifying the ABC test, AB 5 contains carve-outs for several industries and professions; however, several industries, including trucking, did not receive express carve-outs.
As applied to motor carriers, AB 5 provides a mandatory test for determining whether a person driving or hauling freight for another contracting person or entity is an independent contractor or an employee. Under the ABC test, an owner-operator is presumed to be an employee unless the motor carrier establishes three requirements:
- 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.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
CTA argued that the FAAAA expressly and impliedly preempts the second requirement of this test. Judge Benitez found that CTA is likely to succeed on this front, finding that “AB-5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are.” Because “drivers perform work within ‘the usual course of the [motor carrier] hiring entity’s business,’”—contrary to the second requirement—they “will never be considered independent contractors under California law,” the court found. The judge further noted that AB 5 “provides an alternative should the ABC test be struck down.”
Thus, concluding that CTA “lacked any other adequate legal remedy to preserve the status quo over the brief period of time before the Court can address their preliminary injunction motion,” the court granted CTA’s motion for a temporary restraining order.
As a result, the state attorney general, secretary of the California Labor and Workforce Development Agency, acting director of the Department of Industrial Relations, California labor commissioner, and director of the California Employment Development Department are enjoined from enforcing AB 5 as to any motor carrier operating in California until resolution of CTA’s motion for a preliminary injunction.
Ogletree Deakins will continue to report on any further news regarding AB 5 on its California blog.