Trucking’s California legal battles have conflation potential

The Teamsters union is confident that a Monday federal court decision upholding an award of $55 million in back wages to Wal-mart Stores’ (NYSE:WMT) drivers in California will withstand any challenge from a 1994 federal law preempting state trucking regulations. Events of the past two weeks, however, may have muddied the waters a bit.

In separate rulings since the start of 2020, two state judges said that trucking is entitled to a pass from AB5, a California law that makes it harder for companies to prove their workers are independent operators and not employees. That’s because the 1994 Federal Aviation Administration Authorization Act (FAAAA) exempts truckers from intrastate regulations, the judges reasoned. 

The Teamsters, in a filing Tuesday with the 9th Circuit Court of Appeals, called on the court not to confuse the two issues because they operate on separate tracks. The 1994 preemption law bars states from setting prices, mandating or barring certain routes or telling motor carriers what services they can and can’t offer. The state’s employment practices at issue in the Walmart case have no bearing on trucker rates, routes or services, the union said. Walmart should not be allowed to assert federal preemption to avoid what amounts to a separate state-mandated obligation, the union said.

Writing for a three-judge panel of the 9th Circuit, Judge Eugene E. Siler rejected Walmart’s federal preemption claim and ruled California’s state’s wage and hour rules fall outside the FAAAA’s jurisdiction. Using Judge Siler’s opinion as leverage, the Teamsters said that  AB5 falls under the state employment-practice classification because it is not a factor in determining rates, routes or services, the Teamsters said. Instead, the state law merely establishes a “test” to match workers to their particular circumstance of employment, the Teamsters said.

The panel’s ruling affirmed a district court decision supporting a $54.6 million jury award for driver time spent on 10-hour end-of-shift layovers, rest breaks and inspections. The jury found that Walmart exercised control over the drivers’ schedules during the layovers and other breaks. Under state law, employees must be paid a minimum wage covering the entire time they work under what is known as an employer’s “control.” 

The back wages would be added to the drivers’ salaries, arguably the most generous in all of trucking. The driver class has argued it should be paid the difference between a Walmart “layover fee” and the wage entitled to under state law. Walmart is weighing its legal options, but it has said its drivers are already well paid, especially in California.

As fate would have it, the battle between the state and the California Trucking Association (CTA) over AB5 will continue on Monday in the courtroom of Federal District Court Judge Roger Benitez, who last week blocked the enforcement of AB5 in the trucking industry, saying it was likely the FAAA law superseded the stat ruling. Earlier this week, Judge William Highberger of the Superior Court in Los Angeles said much the same thing: That the FAAAA preempts California imposing AB5 on the trucking sector. 

The Teamsters have opposed FAAAA from the start, though they didn’t put up a robust lobbying effort at the time. The preemption gives carriers the leeway to manipulate the legal system to shortchange drivers, the union has argued. The trucking industry, besides arguing the legal merits of the federal law, maintained that complying with state wage and hour rules comes at a price. Those costs are embedded into rate, route and service decision-making, thus having a material, if not direct, impact on the economics of their business, truckers have said.