Transportation Brief: AB 5 Petition Denied by U.S. Supreme Court

by Shannon M. Cohen, Gregory M. Feary, Prasad Sharma

September 14, 2022

On June 30, the U.S. Supreme Court refused the California Trucking Association’s (CTA) appeal to maintain an injunction prohibiting enforcement of California’s AB 5 (the strict ABC worker status test used in California). On August 29, the injunction was lifted. AB 5 can now be enforced by state officials against the trucking industry.

CTA announced that it will pursue a new injunction, arguing that federal law preempts the stricter standard required by the Ninth Circuit or that AB 5 creates an unconstitutional burden under the dormant commerce clause. Regardless of the legal arguments, the CTA has signaled that it will continue pursuing (perhaps uphill) efforts for legislative relief. Independent trucker protests disrupting traffic at California’s ports and AB 5 pressure on an already stressed supply chain will keep the issue in the public eye.

Although AB 5’s ABC test may prove difficult for the traditional owner-operator relationship, the U.S. Solicitor General and at least one state appellate court (in a case involving Cal Cartage) have suggested the business-to-business (B2B) exemption could be satisfied (resulting in application of the longstanding Borello test).

The exemption requires a contractor to act as a business entity and to meet the elements in Cal. Labor Code § 2776(a), including one that requires a business license and another requiring a distinction between customers served by the contractor and those of the alleged employer. Although only of persuasive value, the Cal Cartage court indicated the business license requirement refers to local business licenses and not to motor carrier authority. The court also indicated an owner-operator could be viewed as providing services directly to the motor carrier and not to the carrier’s customers, satisfying the “customer” element. The case law may develop unevenly with respect to these and other required elements.

Transportation businesses may use various strategies in an effort to comply with AB 5, but a clear solution remains unknown. Such strategies may range from relying on a broker-carrier model where owner-operators obtain motor carrier authority, to dispatch management, to converting to an employee model (assuming owner-operators are willing to abandon their businesses), or even shuttering California operations. Thoughtful and informed implementation is just as important to a defensible model as selecting the best options. The legal developments to come will require thoughtful reactions.

• Transportation Brief: Consumer Protection Class Actions — A New Favorite for IC Drivers
  by Karen Butler Reisinger , Angela S. Cash
  
  Recently, independent contractor drivers in Iowa, Oklahoma, Tennessee, and Utah have obtained class certification of claims alleging deceptive practices by a motor carrier under state consumer protection statutes. More from Scopelitis on instances wherein contractors argue that motor carriers deceive drivers by promising monthly miles or revenue in the recruiting process that fails to materialize.
• Transportation Brief: Illinois Supreme Court Poised to Issue Key Biometric Privacy Law Rulings
  by Jared Kramer
  
  Illinois’ Biometric Information Privacy Act (BIPA) is one of the nation’s toughest laws regulating the collection, storage, and use of biometric identifiers. The Illinois Supreme Court is considering two cases that may have significant ramifications for companies that have potential exposure under the law. Read more about these cases and their potential impact on the industry.
• Transportation Brief: Individual PAGA Claims Can be Arbitrated, But Only Where the FAA Applies
  by Braden K. Core , Prasad Sharma
  
  The U.S. Supreme Court held that California’s long-standing rule prohibiting parties from agreeing to arbitrate Private Attorneys General Act (PAGA) claims is preempted by the Federal Arbitration Act (FAA). However, there are limits to the holding. Read more from Scopelitis on those limits.
• Transportation Brief: Supreme Court Addresses “Transportation Worker” Exemption from the FAA
  by Braden K. Core , Prasad Sharma
  
  In a unanimous opinion, the U.S. Supreme Court clarified who qualifies as a “transportation worker” for purposes of the exemption from the Federal Arbitration Act (FAA). In Southwest Airlines v. Saxon, the Court held that an airline’s ramp supervisor, who regularly performed loading and unloading of luggage, mail, and cargo, was exempt from the FAA. Read more about the Court’s reason and how it might apply to workers.
• Transportation Brief: Spotlight on The Firm’s Air and Ocean Practice
  by Braden K. Core , Nathaniel G. Saylor
  
  Freight forwarders that handle air and ocean cargo face a daunting set of legal hurdles at every turn. The Scopelitis Air and Ocean Practice helps clients navigate this often-uncertain legal environment by charting a course to success that aligns with the unique objectives of each business. Learn more about how Scopelitis attorneys help businesses with air cargo and ocean cargo issues, respectively.
• Transportation Brief: For the Record, Summer 2022
  
  News about Scopelitis Law Firm. 
• On the Road
  Scopelitis attorneys are often invited to participate in meetings with transportation industry leaders. Learn more about their trips this quarter.
• Dispatches
  Transportation Industry News & Trends