As first reported in November, California’s Assembly Bill 5 (AB5) legislation sought to limit California-based companies in the number of workers they can classify as independent contractors versus employees.
But according to the latest ruling from state courts, the validity of AB5 and how truckers are classified cannot be implemented. On January 8, 2020, local Los Angeles courts ruled that drivers could not be coded under AB5 because the of the Federal Aviation Administration Authorization Act (FAAAA) and violation of existing federal law.
Judge William Highberger stated that AB5 had “clearly run afoul of Congress’s 1994 determination in the Federal Aviation Administration Authorization Action (FAAAA),” when it was applied to trucking. “Thus, absent some application exception, the ABC Test prohibits motor carriers from using independent owner-operator truck drivers.”
Since the issue began, the California Supreme Court created an ABC test to streamline classification of drivers.
The ABC test is used to determine whether a person is an employee or an independent contractor for the purpose of determining state unemployment tax.
AB5 states that a trucker will be considered an employee rather than an independent contractor unless the company can demonstrate that all of the following conditions are satisfied:
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
Trucking companies without a doubt going to fail prong B of the ABC test. Prong B requires a driver to be doing work “outside of the usual course of the hiring entity’s business,” Judge Highberger wrote.
“The question remains whether such a prohibition (the ABC test) has sufficient direct or indirect effects on motor carrier prices, routes and services and is therefore preempted by the FAAA,” Highberger wrote. “This court… concludes that it does.”
Despite the new California rulings, New York Governor Andrew Cuomo has called for an AB5 like legislation in New York and New Jersey and has sent it to the legislation to action.
There are currently multiple lawsuits challenging AB5 at both the local and Federal level.
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