Federal Court Grants Temporary Restraining Order Prohibiting AB-5 From Applying To Motor Carriers Operating In California

Author:Ms Linda Auerbach Allderdice, Michael T. Maroney and Jameson B. Rice
Profession:Holland & Knight

California Assembly Bill 5 (AB-5), a law aimed at classifying most workers as employees rather than independent contractors, went into effect Jan. 1, 2020. However, the day before the law took effect, U.S. District Judge Roger T. Benitez of the Southern District of California granted the application of the California Trucking Association (CTA) for a temporary restraining order enjoining enforcement of AB-5 against any motor carrier operating in California. (California Trucking Association et al. v. Attorney General Xavier Becerra et al., Case No.: 3:18-cv-02458-BEN-BLM, Dkt. No. 77.) The TRO is in effect at least through Jan. 13, 2020, when the court is set to hear CTA's motion for a preliminary injunction. Holland & Knight's Transportation Blog will provide an update following the court's Jan. 13 hearing.

Among other things, AB-5's newly created Section 2750.3 of the California Labor Code codifies the "ABC" test for employee versus independent contractor classification adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Dynamex), 4 Cal. 5th 903 (2018). The "ABC" Test provides that:

a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) the person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of work and in fact.

(B) the person performs work that is outside the usual course of the hiring entity's business.

(C) the person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

The court found that AB-5's Prong B is likely to be preempted by the Federal Aviation Administration Authorization Act (FAAAA), because that prong "effectively mandates that motor carriers treat owner-operators as employees rather than the independent contractors that they are. In other words, because contrary to Prong B, drivers perform work within 'the usual course of the [motor carrier] hiring entity's business,' drivers will never be considered independent contractors under California law." (Slip Op. 5.) The court further found that the CTA established the likelihood of imminent, irreparable harm "because without significantly transforming their operations to...

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