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February 17 2020

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Februar y 17 2020 | The Journal of Commerce 39 Government SUPPORTERS OF AB5, a new worker classification law in California that would make it harder for trucking com- panies to contract with independent drivers, face a narrow path to victory, if legal precedent is any indication. US District Court Judge Roger Benitez on Jan. 16 issued a preliminary injunction against enforcement of AB5 as it applies to trucking, citing federal preemption of the new state law with regard to interstate commerce. What's more, the court that will hear the expected appeal of Benitez's injunction ruled in favor of such a preemption in a landmark case a decade ago. The US Ninth Circuit Court of Appeals in 2010 ruled against an attempt by the Port of Los Angeles to ban independent contractor drivers in its 2008 clean-truck program, according to two attorneys familiar with the two current AB5 court cases. The court ruled that the ban could not be enforced because the Federal Aviation Administration Authorization Act (FAAAA) of 1994 grants authority over interstate commerce to Congress, rather than to local or state authorities. From the perspective of the trucking industry, that Ninth Circuit ruling definitively resolved the fed - eral preemption issue. "The law that Benitez applied is the Ninth Circuit law," said Greg Stefflre, an attorney for more than 40 years and the owner of Rail Delivery Services, who has represented both the CTA and Ameri- can Trucking Associations (ATA). Similar to the CTA case, People of California v. Cal Cartage, which was heard in California Superior Court by Judge William Highberger, questioned whether licensed motor carriers (LMCs) may contract with inde- pendent owner-operator drivers, or whether the LMCs must hire the driv- ers as employees, as required under AB5. Cal Cartage is also under appeal after Highberger ruled on Jan. 8 that AB5 is preempted by the FAAAA. Three-prong test AB5, which was signed by Gov. Gavin Newsom in September, codifies a ruling in the 2018 case Dynamex Operations West v. Superior Court of Los Angeles. Dynamex established the so-called ABC test for determin- ing independent contractor status through three prongs: Prong A, the worker is free from the control of the hiring entity; Prong B, the work per- formed is outside the usual course of company business; and Prong C, the worker is engaged in an independently established trade or occupation. Stefflre said that until 2018, classifi- cation of drivers in the trucking indus- try was subject to the "Borello" test, created in a 1989 decision that relies on multiple factors to determine indepen- dent contractor status. The "primary factor" in determining independent contractor status in Borello as applied to trucking was that the driver is free from control of the trucking company and controls the manner and means of his or her occupation. Multiple secondary factors that help to determine worker status in trucking are that the driver sets the hours of operation, can freely turn down a job, makes a significant investment in the asset (truck), and has the opportunity to make, or lose, money depending upon how much work he or she chooses to perform. Stefflre said owner-operators with whom he contracts gross between $60,000 and $160,000 a year. The trucking industry originally turned to the independent contractor model when trucking was deregulated by the federal government in 1980. That model was not seriously chal- lenged until the 2008 employee-driver mandate by the Port of Los Angeles. The Ninth Circuit ruling against enforcement of the employee-driver mandate was later upheld by the US Supreme Court in 2013. At the root States such as California and New Jersey are concerned with the issue of independent contractor versus employee status because revenue agen- cies view the independent contractor model as costing them millions of dol- lars a year. In addition, groups like the California Employment Development Department view the independent contractor model as being used to deny workers basic rights such as rest breaks, overtime pay, and pension benefits. Greg Feary, a partner in the firm Scopelitis, Garvin, Light, Hanson & Feary, told The Journal of Commerce that the Becerra and Cal Cartage cases have similarities, but they are proceeding on independent tracks. Both cases involving AB5, Feary said, ultimately come down to the question, "Does the application of the ABC test as written into AB5 create a significant impact on prices, routes, and services of LMCs?" In their appeals, attorneys rep - resenting the state are expected to argue that failure to adhere to the ABC test codified in AB5 will cause irreparable harm to the people of California. Feary said that given the experience of the past decade, he is "skeptical" that the courts will rule in favor of the state. Another factor weighing against AB5 in the litigation is the federal Dormant Commerce Clause, which is based on the Constitution's Commerce Clause and is intended to protect LMCs from having to deal with a "patchwork of state laws" when moving freight from one state to another, Feary said. This principle also supports the asser- tion that federal law preempts Califor- nia law in the area of commerce. JOC email: twitter: @billmongelluzzo International | Washington | Customs | Security | Regulation Past is prologue Federal preemption precedent narrows path for AB5 victory By Bill Mongelluzzo The US Ninth Circuit Court of Appeals (pictured) has ruled in the past that state bans on independent contractor drivers are preempted by the FAAAA. Wikimedia Commons State revenue agencies view the independent contractor model as costing them millions of dollars a year.

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