In a brief one-line order, the U.S. Supreme Court denied the California Trucking Association’s petition to review a lower court ruling holding that federal law does not preempt California’s independent contractor law. The ruling means those in the transportation/logistics industry will now need to operate in a regime where their transportation drivers could be seen as employees under California’s independent contractor law.
As background, the California Trucking Association first brought their challenge following the passage of A.B. 5, which codified an earlier state supreme court decision. With certain exceptions, the law, which took effect in January 2020, required companies using independent contractor workforces to meet three factors when classifying them as independent contractors: (1) that they were free from the company’s control and direction; (2) that they perform work outside the company’s regular business; and (3) that the work is done by someone who has their own independent business or trade doing that kind of work. Otherwise known as the ABC test, the law placed a heavy burden on companies to meet all three criteria.
The California Trucking Association, however, sought to argue that the law was preempted by a federal law – the Federal Aviation Administration Authorization Act (the “FAAAA”) – contending that the law, if applied, would adversely impact prices, routes or services – which the FAAAA was designed to regulate and curtail. Despite its argument, a split appellate court found that the FAAAA did not preempt A.B. 5.
With the High Court now denying review, we strongly recommend that those in the motor carrier industry review their independent contractor practices in California.
If you have any questions regarding this Alert or other issues impacting independent contractor practices in California, please contact the Alert's author, David L. Cheng, partner in our Los Angeles office and member of our Gig Economy practice group at dcheng@fordharrison.com.