California Court of Appeal Rules That the FAAAA Does Not Preempt State’s Controversial Independent Contractor Test
The legal landscape surrounding independent contractor relationships in California continues to evolve swiftly.
As we wrote here, in January 2020, state court Judge William Highberger issued a decision holding that the Federal Aviation Administration Authorization Act (“FAAAA”) preempts use of California’s version of the “ABC” test (as adopted by the California Supreme Court in Dynamex Operations West Inc. v. Superior Court, and subsequently codified in AB 5) to differentiate between independent contractors and employees in the trucking industry. More specifically, Judge Highberger held that “b]ecause Prong B of the ABC Test … prohibits motor carriers from using independent contractors to provide transportation services, the ABC Test has an impermissible effect on motor carriers’ ‘price[s], route[s], [and] service[s]’ and is preempted by the FAAAA.”
Only weeks later, in a separate matter in federal court, U.S. District Court Judge Roger Benitez granted a preliminary injunction to prevent the State of California from enforcing AB 5 against the trucking industry, concluding that the plaintiffs in that case had met their burden to show a likelihood of succeeding on the merits with respect to their preemption claim.
The California Court of Appeal has now weighed in. On November 19, 2020, the Court reversed Judge Highberger’s decision and held that the FAAAA does not preempt application of the “ABC” test in the trucking industry. In reaching its conclusion, the Court reasoned that the “ABC test is a law of general application,” and it “does not mandate the use of employees for any business or hiring entity.”
The Court of Appeal likely will not have the last word on this issue. At least some of the trucking businesses involved in the case reportedly plan to seek review from the California Supreme Court.
In addition, Judge Benitez’s preliminary injunction ruling is pending on appeal before the Ninth Circuit. And even the Ninth Circuit’s anticipated decision may not finally resolve the matter, as the issue could ultimately reach the United States Supreme Court.