On November 19th, the California Court of Appeals reversed the court decision in People v. Cal Cartage Transportation Express, LLC. In short, the appeals court ruled that the “ABC” test that comprises the heart of AB-5 is not in contradiction with federal law and as such is not overridden by it.
The California Court
In January 2018, the Los Angeles City Attorney’s office sued NFI Industries and the smaller companies it owns, including Cal Cartage Transportation Express after which part of the lawsuit is named, for alleged misclassification of truck drivers. This was before AB-5 became law, but the assembly bill becoming law only made the initial lawsuit stronger in the eyes of the LA City Attorney’s office.
NFI industries and its subsidiaries in its defense did not spend so much time arguing that they did not violate AB-5, but rather that AB-5 did not matter because it was superseded by the Federal Aviation Authorization Act of 1994 (FAAA), which (basically) says that states cannot make laws related to price, route, or service of any motor carrier when it comes to the transportation of property.
The appellate court ruled that AB-5 did not violate the FAAA because it had nothing to do with prices, routes, or services of a truck driver. Their findings indicated that having owner-operators work as employees of a larger carrier would not impact prices, routes, or services, and that both laws could exist in tandem. Furthermore, they cited the business-to-business exemption in AB-5 to say that the AB-5 test does not prohibit motor carriers from using drivers as independent contractors outright, provided they fulfill a list of established criteria.
The court of appeals ruling is a decision that may impact how truckers go about their business, but not just yet. The court case CTA v. Becerra is the case that had an injunction filed against it in January, preventing it from being official law until it goes through proper court proceedings, including the federal 9th Circuit Court of Appeals.
In the end, it may appear that AB-5 has little to no effect on the state. Voters in California voted yes on Proposition 22 in a 59-41 split, which carved out an exemption from AB-5 for app-based delivery companies such as DoorDash and Uber. These are the original companies AB-5 was intended to target in minimizing worker exploitation.
What AB-5’s ultimate impact on the trucking industry will be is yet to be seen.