Ninth Circuit Holds AB-5 Applies to Motor Carrier Workers in California
California employers have been grappling with the difficult and fact-intensive issue of classifying their workers as employees or independent contractors ever since the California Supreme Court issued its landmark 2018 decision in Dynamex Operations West, Inc. v. Superior Court, which was ultimately codified into law by California’s AB-5 and revised by AB-2257. The Ninth Circuit’s recent decision in Cal. Trucking Ass’n v. Bonta analyzed the applicability of AB-5 to the motor carrier industry and found that AB-5 was not preempted by the Federal Aviation Administration Authorization Act of 1994 (the “F4A”). As such, the Ninth Circuit held that AB-5, and its accompanying ABC test for determining whether workers are employees or independent contractors, applies to motor carriers.
The F4A was enacted by Congress to preempt state authority in an attempt to provide all companies using motor carriers and air carriers with the same protections, regardless of how they were organized. This preemption, however, is limited solely to state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.”
The Ninth Circuit explained that the framework for its analysis of the applicability of the F4A is to determine whether the state law is “significantly related” to rates, routes or services of a motor carrier or whether it merely has a “tenuous, remote or peripheral connection.” The Ninth Circuit also noted that a law’s general applicability—although not dispositive—makes preemption under the F4A significantly less likely.
California Trucking Association (“CTA”) advanced two main arguments in favor of preemption under the F4A: (i) AB-5’s impact is so significant that it indirectly determines prices routes or services and (ii) AB-5 requires employers to hire employees rather than independent contractors, and thus is related to the prices, routes, and services of a motor carrier. The Ninth Circuit rejected both arguments, which were premised on the indirect impact of AB-5, and found that it is not preempted by the F4A. Specifically, the Ninth Circuit held that AB-5 impacts the way that motor carriers must classify their workers and therefore only compels a particular result with respect to motor carriers’ relationship with their workforce. It does not, however, compel a specific result with respect to motor carriers’ relationship with their consumers, and as such, is not significantly related to a price, route, or service of a motor carrier.
On June 21, 2021, the Ninth Circuit denied CTA’s petition for rehearing en banc. The Ninth Circuit, however, granted CTA’s motion to stay the issuance of the mandate to permit CTA to file a writ of certiorari. Absent review by the Supreme Court, motor carriers will need to reevaluate the classification of their workers in California under AB-5’s ABC test.