U.S. Supreme Court Denies Certiorari And California Trucking Industry Prepares For AB5

• Published date: 04 July 2022
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Aviation, Rail, Road & Cycling, Trials & Appeals & Compensation
• Law Firm: Lewis Brisbois Bisgaard & Smith LLP
• Author: Ms Julie E. Maurer, Joseph Baratta and Jerica Peters

Phoenix, Ariz. (July 1, 2022) - On June 30, 2022 - the final day of the October 2021 term - the U.S. Supreme Court declined to review whether California's worker classification law runs afoul of the Federal Aviation Administration Authorization Act of 1994 (FAAAA) as applied to truck drivers. This blow to 70,000+ independent contractors in California will reverberate across the national supply chain and interstate commerce, as the high court's decision to not review the Ninth Circuit's holding in California Trucking Association, Inc., v. Bonta effectively upends the trucking industry's longstanding business model and uniformity necessary for the free flow of interstate commerce and the operation of nationwide businesses. This is not the first time the high court has declined to hear a challenge to California's worker classification law. As recently as October 2021, the Supreme Court denied a petition for certiorari by Cal Cartage Transportation Express LLC, which claimed a state appellate court's ruling in 2020 upholding Assembly Bill 5 (AB5) threatened the longstanding "owner-operator" model.

For decades, classification of California workers as independent contractors or employees had been governed by the multi-factor test described in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399 (Cal. 1989). Prior to 2018, motor carriers treated owner-operators as independent contractors, a move beneficial to all. Indeed, this use of owner-operators enabled motor carriers to expand without major capital investment, making it possible for them to bid on jobs and provide services that otherwise could not be economically offered (e.g., using refrigerated or tanker trucks or trucks to transport hazardous materials). Motor carriers dependent on their own fleets and employee drivers simply cannot keep infrequently used, specialized equipment on hand because of the capital costs associated with acquiring this equipment. Of course, these fiscal savings were not limited to the motor carriers themselves but also had the added benefit of being passed on to the end consumer.

In 2018, the California Supreme Court held that a new test for independent contractor status, the so-called 'ABC' test, would apply to claims under state wage orders. See Dynamex Operations W., Inc. v. Superior Ct....