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Law Alert: Dynamex subject to FAAAA preemption

by Gregory M. Feary, James H. Hanson

Dec 5, 2018

 

FAAAA Preempts Application of Dynamex ABC Test to Motor Carriers | California Federal District Court Decision

On November 15th, the United States District Court for the Central District of California held that the Federal Aviation Administration Authorization Act (“FAAAA”) preempts the application of the “Dynamex” ABC Test to a motor carrier for purposes of determining whether owner-operators are considered employees under California’s Wage Orders. See Alvarez v. XPO Logistics Cartage, LLC, 2018 WL 6271965, at *5 (C.D. Cal. Nov. 15, 2018). The court distinguished the Ninth Circuit’s decision in Dilts v. Penske Logistics, LLC, reasoning that Dilts addressed the preemption of “parts of the California Labor Code itself,” not “whether the ABC test-used to interpret wage orders—is preempted.” Id. at 7.

The XPO Logistics decision generally comes as welcome news to motor carriers facing misclassification claims under wage orders in California, where once again the multifactor Borello test should apply. The owner-operator plaintiffs at issue scored a few wins in this case too. For example, the court also found the FAAAA does not preempt misclassification claims brought under California’s Unfair Competition Law. Perhaps more importantly, the court found the Federal Leasing Regulations preempt only the owner-operator plaintiffs’ claims for reimbursement of their truck lease payments, not the plaintiffs’ claims for reimbursement of various other business expenses (including, e.g., insurance coverage costs). The court’s conclusion in this regard is key, as other courts applying California law have found the Leasing Regulations preempt a wider range of expense reimbursement claims.

Without further guidance from an appellate court, it is difficult to predict where future courts will land on the preemption defenses addressed by the XPO Logistics court. In the interim, any motor carrier utilizing owner-operators in California should consider taking steps to avoid becoming a misclassification litigation target and potentially reduce its liability exposure in the event of a misclassification determination. For questions about the Dynamex or Alvarez decisions, please contact Jim Hanson or Greg Feary.

For a more complete discussion of the Dynamex decision, please see our May 2, 2018 Transportation Law Alert (available here) and June 21, 2018 Transportation Law Alert (available here).

 

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Scopelitis Transportation Law Alerts are intended as a report to our clients and friends on legal developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

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