The U.S. Court of Appeals for the Ninth Circuit has upheld California’s worker classification law known as AB5.
The controversial law, which was signed in 2019, creates stringent standards to determine whether a worker is an employee or an independent contractor.
Many in the trucking industry have argued that the law effectively ended the leased owner-operator business model in the state. The Owner-Operator Independent Drivers Association, which represents small-business truckers, told the Ninth Circuit that AB5 violates the Commerce Clause and the Equal Protection Clause of the U.S. Constitution.
On Friday, May 16, the Ninth Circuit ruled in favor of the state.
Commerce Clause
The Commerce Clause prevents states from imposing regulations that place an undue burden on interstate commerce.
OOIDA argued that AB5 created an undue burden because the law prevents truck drivers who are leased on to a motor carrier from operating in California.
“OOIDA argues that AB5 functionally prohibits certain kinds of truck drivers from working in California,” the Ninth Circuit wrote. “However, as OOIDA implicitly concedes, AB5 does not preclude out-of-state drivers from working in California; nor does it favor in-state drivers at the expense of out-of-state drivers. At worst, AB5 restricts what kind of drivers may operate in California.”
During oral arguments, OOIDA attorney Paul Cullen Jr. said there are distinct differences between employee drivers, leased owner-operators and owner-operators with their own authority.
“I’d like to clarify opposing counsel’s descriptions that you could just be an employee or a motor carrier,” Cullen said. “As we described, these are very different entities. They try to conflate the three as just truck driving jobs. But an employee is not a small-business employer, and becoming a motor carrier … AB5 to trucking is like a law that would tell a lawyer you can’t be a lawyer anymore but you can be a paralegal.”
Equal Protection Clause
OOIDA also argued that AB5 violates the Equal Protection Clause, as California provides an exemption that intrastate truckers can use but federally regulated interstate truckers cannot.
Interstate owner-operators with their own authority can continue to deliver freight in California, and California intrastate leased owner-operators can qualify under the state’s business-to-business exemption. However, OOIDA told the court that out-of-state interstate owner-operators who are leased to a motor carrier can’t meet the exemption standard because it conflicts with federal regulations.
“Leased owner-operators in interstate commerce must comply with federal regulations called the Truth in Leasing regulations, which require the motor carrier to have exclusive possession and control of the vehicle and the operation of that vehicle in interstate commerce,” Cullen said. “Whatever the scope of that control is, it can’t be squared with the B2B requirement that the worker be free of control. It’s irreconcilable.”
The Ninth Circuit said that AB5 does not violate the Equal Protection Clause because the B2B exception “does not drop a distinction between intrastate and interstate drivers.”
Reactions
OOIDA President Todd Spencer said that the Association is “disappointed” in the decision and is in the process of assessing its options.
California Attorney General Rob Bonta celebrated the ruling and said that AB5 “is essential in preventing the exploitation of workers misclassified as independent contractors, including in the trucking industry …” LL
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