Hunton Employment & Labor Perspectives

In an April 28, 2021 decision, the Ninth Circuit determined that the application of California’s ABC test (also known as AB-5) to motor carriers is not preempted by the Federal Aviation Administration Authorization Act of 1994 (“F4A”). The ABC test is a judicially-created independent contractor test that was ultimately codified via AB-5. For a more in-depth discussion of AB 5, visit our previous blog post here.

The case, California Trucking Association, et al. v. Rob Bonita, et al., was brought by the trade organization that represents motor carriers who hire independent owner-operators to transport property. CTA sought to enjoin enforcement of AB-5, and in particular, the “B” prong of the ABC test, which states that a worker is an employee unless they perform work that is outside the usual course of the hiring entity’s business. In particular, CTA argued that AB-5’s “B” prong contravened F4A’s express preemption of any state law regarding the price, route, or service of any motor carrier. The district court determined that CTA was likely to succeed on the merits of its claim and granted a preliminary injunction.

The Ninth Circuit reversed in a 2-1 opinion, and held that the F4A did not preempt AB-5 because it is a labor law of general applicability that “does not bind, compel, or otherwise freeze into place the prices, routes, or services of motor carriers.” Rather, it affects a motor carrier’s relationship with its workforce. According to the Ninth Circuit, a state law does not have a binding or freezing effect simply because a motor carrier has to consider the law in making business decisions. As such, the law was not “significantly related to rates, routes, or services.”

The Ninth Circuit’s ruling threatens a decades-old practice of motor carriers hiring a workforce of independent-owner operators and classifying them as independent contractors. CTA has stated that it is seeking an en banc rehearing. In the meantime, motor carriers should work with their labor and employment counsel to ensure that they comply with California’s strict requirements regarding independent contractors.