Dive Brief:
- The U.S. Supreme Court declined to hear Cal Cartage Transportation Express' appeal of a California appellate court's decision that California's worker-classification law, Assembly Bill 5, violated federal law regulating the prices, routes or services of motor carriers. AB5 mandates a set of criteria for classifying workers as independent contractors.
- Cal Cartage went to the highest court in the land, after being declined for review by the California Supreme Court. Now that the case has been rejected by the U.S. Supreme Court, the case could go back to California courts or regional federal courts.
- Transport trade groups fiercely oppose AB5. The California Trucking Association is also suing in the court system, and its litigation is distinct from Cal Cartage's. The CTA won a preliminary injunction stopping California from enforcing AB5 on the trucking industry, and the injunction remains in place while CTA also seeks a U.S. Supreme Court review.
Dive Insight:
Cal Cartage's lawsuit centers on the question of whether the Federal Aviation Administration Authorization Act preempts AB5. And different courts have come to different conclusions. The FAAAA was upheld by a California superior court, which ruled in Cal Cartage's favor in January 2020. But later in 2020, a California appellate court reversed the decision.
The California Supreme Court laid down a test for contracted workers in 2018. Since then, the trucking industry in the Golden State has been engaged in fierce legal battles with the decision.
AB5 was the legislative endorsement of the decision, and was written into state code. Transport officials thus had to battle the regulation on a new front.
At issue is the law's ABC test, a set of three criteria testing if a worker can be classified as an independent contractor. It is the "B" aspect that has trucking fighting in courts: The contractor in question must be paid to perform work that is outside the usual scope of what the company does.
That means if a drayage company hires an independent trucker to help move cargo out of the ports in Southern California, the company would likely have to consider that driver an employee.
With that comes the obligation to provide the usual wages, benefits and breaks that California mandates.
Trucking officials believe they are being robbed of the ability and flexibility to hire independent contractors as freight ebbs and flows. Trade groups also fear independent truckers will leave the state at a crucial time, as the ports are clogged and in need of tractors to help unload all the docked ships off the ports of Los Angeles and Long Beach.
The B prong of the test and AB5 in general will hamper how many trucking firms begin and grow, said David Heller, vice president of government affairs for the Truckload Carriers Association, speaking earlier this year on AB5. Major TL carriers were first independent-carrier models, Heller said.
"Any threat to that business model we would certainly push back against," said Heller. "It's a needed entity in this business."
The next step in the battle will be CTA's turn at the U.S. Supreme Court. CTA's case relies on slightly different arguments and factual statements compared to ones implemented by Cal Cartage regarding the FAAAA. And the cases originated in different courts, with the CTA asking for a U.S. Supreme Court review of a decision made in the U.S. Court of Appeals for the Ninth Circuit.
The head of the CTA said he hopes his group will get another chance to go at-bat for trucking in the nation's highest court. It's a likely next step because a federal appellate court has already weighed in.
"The contributions of California's 70,000 independent truckers have been vital to keeping America afloat during this supply chain crisis," said Shawn Yadon, CTA CEO, in a statement emailed to Transport Dive. "They deserve their day in court and we are hopeful that the U.S. Supreme Court will grant the CTA's petition."
