Sacramento, CA (WorkersCompensation.com) – The California Trucking Association has filed suit against the state of California in regards to “gig economy” legislation set to take effect in January 2020.
The legislation, AB 5, would change the requirements for companies to classify a worker as an independent contractor. The trucking association, and two independent owner-operator truck drivers, filed the suit in U.S. Southern District Court on Nov. 12. The suit is an amended complaint for injunctive relief against the employment test that came as a result of the court’s decision in Dynamex Operations West, Inc. v. Superior Court.
The Dynamex decision is the basis of the AB 5 legislation which makes it more difficult for companies to claim workers as independent contractors.
In that decision, the court developed an ABC test to determine the amount of influence a company has over a worker’s duties. The test would require the workers to be free from the control of the company; to be performing work “outside the usual course of the hiring entity’s business;” and to be engaged in an independently established trade, occupation or business similar to the work they would be performing for the company.
As an independent contractor, workers are not subject to wage and hour laws, nor do they receive benefits like workers’ compensation insurance, unemployment insurance, or paid time off. Classifying a worker as an independent contractor saves companies money on taxes, insurance payments and other costs.
Designed mostly to protect drivers for companies like Uber, Lyft and GrubHub from being exploited, the legislation would force gig economy companies to classify workers as employees and provide them with protections from job-related harms.
That test, the CTA suit alleges, is in conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994. Additionally, the suit alleges the test is pre-empted by the U.S. Constitution.
According to the CTA, the test would deny independent owner-operators the ability to continue working as contractors in California, forcing them to abandon investments they’ve recently been forced to make in order to meet California’s Clean Air Standards, and eliminating their freedom to set their own schedules and be their own bosses.
“Many of CTA’s members regularly contract with individual independent contractors who own and operate their own trucks (“owner-operators”) to provide interstate trucking services to customers in California and other states in accordance with federal and state regulations governing the transportation of property,” the lawsuit said. “Prior to Dynamex, it was lawful for CTA’s members who contracted with owner-operators to treat them as independent contractors and not employees for purposes of California’s labor laws. Now, however, under the ABC test adopted in Dynamex and codified at Labor Code § 2750.3, each motor-carrier member of CTA that continues to use individual owner-operators to provide trucking services for their customers must treat such workers as employees and will be required by law to provide them with all protections that California law affords to employees. Given the realities of trucking, it would be impracticable if not impossible for CTA’s motor-carrier members to provide interstate trucking services by contracting with independent owner-operators and to simultaneously comply with California’s onerous requirements for employees. The direct and real consequence of Dynamex and AB-5, therefore, is that CTA’s motor-carrier members, if they wish to avoid significant civil and criminal penalties, must cease contracting with owner-operators to perform trucking services for customers in California and to shift to using employee drivers only when operating within the State.”
CTA’s attorney said the implications go beyond just classification of labor.
“AB 5 has implications that go beyond employment classification in California,” said Robert R. Roginson, an attorney for CTA said in a statement. “With more than 350,000 independent owner-operators registered in the United States, the new test imposes an impermissible burden on interstate commerce under the U.S. Constitution’s commerce clause and infringes upon decades-old congressional intent to prevent states from regulating the rates, routes and services of the trucking industry.”
The new law, CTA CEO Shawn Yadon said, limits the ability of truck drivers to make a living.
“AB 5 threatens the livelihood of more than 70,000 independent truckers,” Shawn Yadon, CEO of CTA, said in a statement. “The bill wrongfully restricts their ability to provide services as owner-operators and, therefore, runs afoul of federal law.”
CTA told its members a win in this lawsuit would “conservatively save the industry $10 billion due to retroactive liability for minimum wage, meal & rest, unreimbursed expenses and other exposure, plus attorney’s fees, penalties, business model changes and decreased efficiencies.”
Legislators said they anticipated pushback from corporations.
“We expect big corporate interests — especially those who have misclassified their workers for years — to take this fight back to the place they know they can delay justice for workers: the courts,” Assemblywoman Lorena Gonzalez, D-San Diego, said in a statement.