CTA makes its case to keep injunction against AB5 in California

The imposition of AB5 against truck drivers in California has been blocked by court action since the start of this year, when it was to go into effect, and the California Trucking Association has spelled out its case to an appeals court on why that should continue.

The CTA, in a recent filing with the Court of Appeals for the 9th Circuit of the Federal District Court, does not lay out any significantly new arguments about why it believes — and lower courts have affirmed — that an earlier federal law preempts AB5.

But with the earlier temporary restraining order and preliminary injunctions stopping AB5 right before it was to be implemented on Jan. 1, the slower pace of the appellate process gives attorneys for the CTA more time to make their arguments.

The appeal against the earlier injunctions was brought by the office of the California attorney general, the original defendant sued by the CTA. The International Brotherhood of Teamsters joined the suit with the state later.

AB5 is a law passed by the California legislature last year and signed by Gov. Gavin Newsom to restrict the use of independent contractors for a variety of occupations. While it was seen as targeting Lyft and Uber (and the state has recently launched AB5-related litigation against those companies), the trucking industry interpreted it to mean the use of independent owner-operators would be severely restricted. The second part of AB5, the so-called B prong, was described in the CTA appeal filing as meaning “a hiring entity may not lawfully classify a service provider as an independent contractor unless the service provider’s work is ‘outside the usual course of the hiring entity’s business.’” The trucking industry’s interpretation is that that would largely exclude almost all use of independent owner-operators by trucking firms, given that a trucking company hiring an independent owner-operator is clearly not outside the “usual course” of the trucking firm’s business.

At the heart of the issue of the original injunction and the ongoing appeal is whether California violated the so-called F4A legislation, a federal law that, according to the CTA “expressly preempts state laws [quoting the law] ‘related to a price, route or service of any motor carrier with respect to the transportation of property.” The CTA’s argument is that AB5 will impact all three of those things.

The CTA filing suggests California has an issue with the entire concept of independent owner-operators, citing what it says is the state’s “longstanding hostility to the use of owner-operators by motor carriers.” According to the CTA, the passage of F4A in 1994 “specifically noted that then-recent California legislation exempting motor carriers from state regulation had denied the exemption to motor carriers” that used a “large proportion” of owner-operators.

The “price, routes and services” test is met, CTA said in its filing. “By banning use of independent contractors and requiring all-employee fleets, the statute both dictates how motor

carriers provide services to their customers and affects which services are provided,” the filing said. “[The CTA] demonstrated that AB-5 will prevent motor carriers from meeting peak

demand and offering specialized services. Plaintiffs also showed that forcing motor

carriers to abandon the owner-operator model will force them to curtail or reconfigure their routes and to increase prices significantly.”

The injunctions came with the court’s forecast that the CTA was likely to win the case, exempting trucking companies from AB5 due to preemption from the F4A. Arguments by the state and the Teamsters in opposition to that lower court forecast “are unpersuasive,” the CTA filing said.

Those defendants have tried to argue that AB5 does not prohibit the hiring of independent owner-operators. But the CTA argument is that even if that specific prohibition isn’t in the legislation, what is in there will result in the same outcome.

“They do not explain how a truck driver hired by a motor carrier could possibly satisfy Prong B and therefore quality as an independent contractor under AB-5,” the filing says. It also refers to comments by California Assemblywoman Lorena Gonzalez, the author of AB5, that “one of the statute’s purposes was to force motor carriers in particular to abandon their ‘outdated’ owner-operator business model,” the filing says.

The injunction blocked AB5 from going into effect. According to the CTA filing, the lower court’s action in handing down the injunction stopped the trucking industry from facing government action, including prosecution, against it for any hiring of independent owner-operators.

The filing states that the Teamsters have disagreed, saying the CTA hasn’t shown “a genuine threat of imminent prosecution.”

“There is no basis to doubt that the state” will enforce AB5, the CTA said. In December, as the lower court was reviewing whether to stop implementation of AB5 in the trucking sector, California “expressly declined to withhold enforcement of AB5, even for a short time.” the filing says.

All this adds up to the prospect that implementing AB5 would result in “irreparable harm” to the trucking industry while the issue of the F4A preemption of state law is litigated. Given that, “the court did not err” in handing down the injunction, the filing says.