California owner-operators granted temporary reprieve from AB5

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California owner-operators will be exempt from enforcement of AB5 law pending a January 13 hearing. (The Trucker file photo)

SACRAMENTO — Owner-operators and the carriers who contract with them received a reprieve late on December 31 when U.S. District Court Judge Robert Benitez issued a temporary restraining order preventing California from enforcing the state’s Assembly Bill 5 (AB5) law in respect to motor carriers.  The law had been scheduled to go into effect just hours after the order was issued.

AB5, intended to protect employers from classifying employees as independent contractors for the employers’ benefit, was challenged by the California Trucking Association (CTA) in a November lawsuit in which the association claimed 70,000 owner-operators in the trucking industry would be adversely impacted should the law be enforced. Specifically, the lawsuit claimed the state law directly conflicted with the FMCSA, the Federal Aviation Administration Authorization Act of 1994 and the supremacy and commerce clauses of the U.S. Constitution.

AB5 included provisions for an “ABC test” to determine whether an individual would be classified as an independent contractor or an employee of a company. The “B” test prohibited companies from using independent contractors unless the worker performed work “outside the usual course of the hiring entity’s business.” In other words, AB5 would prohibit a trucking company that employs drivers from contracting with independent owner-operators as contracted individuals would perform the same type of work as the company’s regular employees.

On December 24, CTA filed for the temporary restraining order, intended to prevent California from enforcing AB5 as related to motor carriers operating in the state. The original lawsuit is scheduled for a hearing on January 13.

In granting the temporary restraining order, Judge Benitez issued a five-page decision in which he wrote that CTA had suitably satisfied the requirements of arguing its original lawsuit was “likely to succeed on the merits” and plaintiffs would be “likely to suffer irreparable harm in the absence of relief.” Several lawsuits had been filed against AB5 from various sectors of the transportation industry, leaving in question whether the law would be enforceable in the form approved by the California legislature and signed by Gov. Gavin Newsom in September.

In the leadup to initiation of AB5, in late 2019, carriers began reducing contracting activities with owner-operators.  Some carriers had ceased all work through independent drivers, while others recommended California-based owner-operators move out-of-state or take on the status of company employees.

Benitez noted in his decision, “Without significantly transforming their operations to treat independent contractor drivers as employees…they face the risk of governmental enforcement actions, as well as criminal and civil penalties.”

Judge Benitez will also hear CTA’s case for a longer injunction Monday, January 13, in his courtroom in the Southern District of California. Defendants in the lawsuit include California Attorney General Xavier Becerra and The International Brotherhood of Teamsters, which has intervened in the case. For two weeks, independent truck drivers in California are protected from the state’s enforcement of AB5 in their industry. Whether an additional extension is granted is dependent on Judge Benitez’s ruling, expected shortly after the January 13 hearing.

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