9th Circuit Permits Enforcement of AB 5 Against Interstate Motor Carriers
In 2020, a California district court granted a preliminary injunction to prevent enforcement of Assembly Bill 5 (“AB 5”) against motor carriers operating within California. AB 5 codified the judge-made “ABC test” for classifying workers as either employees or independent contractors. The district court concluded, “there is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking.”
Shortly after the district court’s decision, the State of California and the International Brotherhood of Teamsters appealed to the 9th Circuit. On April 28, 2021, the 9th Circuit issued its opinion, reversing the district court. The 9th Circuit panel held that the application of AB 5 to motor carriers is not preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The panel found the district court abused its discretion by granting the preliminary injunction. The panel concluded that AB 5 is a generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind, compel, or otherwise freeze into place the prices, routes, or services of motor carriers.
This decision comes on the tail of another 9th circuit decision that the Federal Motor Carrier Safety Administration (“FMCSA”) preempted California’s meal and rest break laws.
The 9th Circuit’s decision on AB 5 is likely to be appealed to the U.S. Supreme Court or a rehearing sought. The preliminary injunction preventing enforcement of AB 5 in the trucking industry will not be lifted immediately but enforcement could start as early as May. This means motor carriers must now determine how to proceed in California under AB 5, unless and until the U.S. Supreme Court grants review or a request for rehearing is granted.