Law Alert: California Court of Appeal Rules AB5 not Preempted by FAAAA
November 19, 2020
Today the California Court of Appeal reversed the trial court decision in People v. Cal Cartage Transportation Express, LLC, holding that the ABC test first expressed in Dynamex and later codified in AB5 is not preempted by federal law.
The court held that the ABC test is a law of general applicability that does not prohibit the use of independent contractors and therefore is not preempted pursuant to the rule set forth by the California Supreme Court in People ex rel. Harris v. Pac-Anchor Transportation, Inc. The court specifically cited the availability of the business-to-business exemption contained within AB5 in support of the concept that the use of ICs is not prohibited by the law.
This decision reverses the trial court’s opinion that because “Prong B of the ABC Test under both Dynamex and AB5 prohibits motor carriers from using independent contractors to provide transportation services, the ABC Test has an impermissible effect on motor carriers’ ‘price[s], route[s], [and] service[s]’ and is preempted by the FAAAA.” Instead, the appellate court held that “the ABC test is not preempted because it is a generally applicable employment law that does not prohibit the use of independent contractors, and therefore does not have an impermissible effect on prices, routes, or services.”
This opinion does not directly impact the CTA v. Becerra case, in which the federal district court in the Southern District of California issued a preliminary injunction prohibiting the state from enforcing the ABC test against motor carriers. That case is currently on appeal to the federal 9th Circuit Court of Appeals.
For additional information, contact Greg Feary, Jim Hanson, Chris McNatt, Shannon Cohen, or Kelli Block.