California Ban on Trucking Contractors Is Back

Interstate truckers could soon come under California’s highly restrictive independent contractor law because of a recent federal appeals court decision.

A three-judge panel for the U.S. Ninth Circuit Court of Appeals voted 2-1 that a federal law called the Federal Aviation Administration Authorization Act (FAAAA) does not preclude application of the state’s AB 5 contractor law to trucking companies operating in interstate commerce.

In early 2020, before the new law went into effect, a federal district court judge granted an injunction barring the state from enforcing it against interstate truckers while the court heard the case they were making that federal law pre-empted the state statute.

Because of the Ninth Circuit action, parties on the other side are expected to ask the district court to vacate the stay, although that had not yet happened at the time this was written.

Trucking interests are expected to appeal the three-judge decision to the full Ninth Circuit, and if the court chooses to uphold it, to the U.S. Supreme Court. The issues arising from how to define and apply the FAAAA to freight transportation have inspired skirmishes, pitched legal battles and seeming last stands over interpretations of the law’s somewhat imprecise language and uneven application.

The nub of the controversy stems from the AB 5 law’s three-part criteria for determining who can be defined as an independent contractor and who must be considered an employee for legal purposes. The “ABC test,” as it has been termed, consists of three criteria, all of which must be present if the person is to be considered a contractor:

• 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 the work and in fact.

• The person performs work that is outside the usual course of the hiring entity’s business.

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

As you can see, the second criterion would be devastating to the trucking industry, which since its founding in the early part of the last century has depended on drivers who choose to lease their trucks and their driving services to other trucking companies. Of course, organized labor, including the Teamsters Union, has been seeking this outcome for decades since they began shedding dues-paying members after the advent of economic deregulation in 1980.

The California law proved to be so controversial that it has been rewritten by the state legislature after a public uproar arose from various types of freelance workers. The law also resulted in the passage of a referendum last year in which voters excluded ride share drivers who work for Uber and Lyft, and drivers for home delivery services like DoorDash.

However, the law continues to pose an even more ominous threat for truckers and other companies that use independent contractors. AB 5 was passed in 2019 by the state legislature to engrave into law a decision handed down in 2018 by the California Supreme Court creating the same ABC test. In January 2020, the same court ruled that the standard would be applied retroactively.

To make matters more complicated, the Ninth Circuit Appeals Court also has held previously that the California Supreme Court’s original decision that established the ABC test also should be applied retroactively to employers.

However, the same law could be coming soon to where you work if Congress succeeds in passing the Protecting the Right to Organize Act (PRO Act), a bill favored by labor unions and strongly supported by Democrat legislators that would outlaw right-to-work laws in states, authorize secondary boycotts, institute card check and subject management to personal civil liability for labor law violations.

Among the other provisions boosting the interests of organized labor, it also would apply the same California ABC test for contractors nationwide. That legislation has already been approved by the U.S. House of Representatives and now is undergoing consideration by the Senate.

Legislative efforts seeking to replicate California’s law have been mounted in other states, and federal agencies like the Department of Labor have grappled with the issue over the years. One thing is certain—it’s not going away anytime soon.

Commentary: Attacks on Contractor Status Intensify

https://www.mhlnews.com/labor-management/article/21143705/commentary-attacks-on-contractor-status-intensify

A prime example of how profoundly an election can change economic life is how a Democratic victory in November could end up wiping out most independent contractors in this country.

This would follow decades of struggle and the fallout of California’s AB 5 law, which went into effect on Jan. 1. That law also serves as a model for legislation in other states and a bill passed by the Democrat-dominated U.S. House of Representatives.

AB 5 created a three-part “ABC” test to determine whether a worker is an independent contractor or an employee. The “B” prong of the test holds that to be a contractor, a worker cannot be in the same line of business as the company using them. This eliminates most contractors, including independent truckers leased to trucking firms and drivers working for rideshare and local delivery services.

Advocates of this radical departure from commonly accepted legal practice claim it’s needed to protect these workers from economic exploitation, and make sure they are covered by workers compensation, unemployment and other insurance. In California, rideshare companies suggested an alternative measure that would include the insurance and other benefits, but still allow drivers to be independent, but it never received serious consideration in the legislature.

The reason is that the real motivation behind all these attacks on contractor status is to stem labor unions’ continuing membership decline by absorbing the former contractors into their ranks. Because independent contractors are defined legally as autonomous business entities, they are subject to antitrust laws and cannot negotiate collectively for wages and benefits.

In fact, AB 5 was introduced by a then-newly elected member of the California legislature who previously served as an official of the AFL-CIO. Also giving the game away is the name of the bill based on AB 5 was recently passed by the U.S. House of Representatives: “The Protecting the Right to Organize Act.”

Trucking interests got state and federal judges to stay AB 5 while challenging its legality regarding interstate truckers. Uber and Lyft also have mounted a referendum for Californians voters to weigh in on the issue—but only regarding rideshare drivers.

When AB 5 was passed, it carved exemptions for a handful of professions, including Amway and other door-to-door salespeople. Many other contractors who were not exempted were devastated by loss of work due to the new strictures, including freelance writers, artists, photographers and musicians, and some swore they would vote for Republicans, including Trump, as a result.

In response, California legislators recently approved additional exemptions for professional musicians, writers and artists, as well as golf caddies and wedding planners, among others. Notably not exempted are high-tech gig workers and industries such as franchising, trucking and the motion picture and television production.

Last year New Jersey followed California’s example in severely restricting contractor status, and other states are only holding off to see how the courts handle lawsuits challenging AB 5. The tussle over contractor status reaches into the highest ranks of the federal government as well. Trump Administration agencies like the National Labor Relations Board and the Department of Labor are reversing Obama-era decisions restricting contractor status.

If the Democrats triumph in November, what will the future look like? Four years ago candidate Hillary Clinton, echoing the words of another Obama Administration high official, proclaimed that there is no such thing as independent contractors; there are only misclassified employees. Given the stakes, it’s clear that this battle will continue to be waged well into the future.

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