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May 3, 2021

Split 9th Circuit Panel Overturns Injunction Favoring Golden State Truckers

Panel Says District Court Abused Discretion

Last Wednesday, in California Trucking Ass’n v. Bonta, 2021 U.S. App. LEXIS 12629 (9th Cir., Apr. 28, 2021), a divided panel of the Ninth Circuit Court of Appeals reversed a January 2020 federal district court’s order preliminarily enjoining enforcement, against any motor carrier doing business in California, of California’s Assembly Bill 5 (“AB-5”), which had codified the judge-made “ABC test” for classifying workers as either employees or independent contractors set out in Dynamex Operations W. v. Superior Ct., 4 Cal. 5th 903, 232 Cal. Rptr. 3d 1, 416 P.3d 1 (2018).

Majority Opinion: AB-5 is Generally Applicable Labor Law

The majority opinion was written by Judge Sandra S. Ikuta. The majority of the panel held that the district court had abused its discretion by enjoining the State of California from enforcing AB-5 against motor carriers doing business in California on the ground that such enforcement was preempted by the Federal Aviation Administration Authorization Act of 1994 (“F4A”). The majority held that because AB-5 is a generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind, compel, or otherwise freeze into place the prices, routes, or services of motor carriers, it is not preempted by the F4A.

Judge Mark J. Bennett dissented, writing that AB-5 both affects motor carriers’ relationship with their workers and significantly impacts the services that motor carriers are able to provide to their customers. Judge Bennett wrote that AB-5 was, therefore, preempted as applied to California Trucking Association’s members.

Might Full 9th Circuit or U.S. Supreme Court Make Final Determination?

The fight between the motor carriers and the State of California is not necessarily over. The split decision raises the possibility that the full Ninth Circuit may take the case en banc. Moreover, in the majority opinion, Judge Ikuta acknowledged that the instant decision is in conflict with Schwann v. FedEx Ground Package Sys., Inc., 813 F.3d 429 (1st Cir. 2016), wherein the First Circuit determined that Prong 2 of the Massachusetts ABC test—which is identical to Prong B of the California ABC test codified in AB-5—sufficiently relates to a motor carrier’s services and routes to warrant preemption, because interfering with the employer’s decision whether to use an employee or an independent contractor could prevent a motor carrier from using its preferred methods of providing delivery services, raise the motor carrier’s costs, and impact routes.

The majority’s holding also conflicts with a Third Circuit decision, Bedoya v. American Eagle Express Inc., 914 F.3d 812 (3d Cir. 2019), cert. denied, 140 S. Ct. 102, 205 L. Ed. 2d 29 (2019). There, the Third Circuit held that the F4A preempts Massachusetts’ ABC test because it “mandate[s] a particular course of action—e.g., requiring carriers to use employees rather than independent contractors.”

If the panel’s decision in the instant case stands, either because the Ninth Circuit refuses to review the case en banc, or because the full Ninth Circuit agrees with the majority of the panel, the United States Supreme Court might still hear the case to resolve the split between the Circuits.

Four Potential Tests Can Be Applied In California

Whether or not the divided panel’s decision stands, those in California still have as many as four tests that might be applied to a dispute involving purported employees versus independent contractors. Those four potential tests are:

  • AB-5, which, as noted above, codifies Dynamex.
  • The Borello test [see S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 256 Cal. Rptr. 543, 769 P.2d 399 (1989), which sets out indicia of an employer-employee relationship as opposed to an independent-contractor relationship. The indicia included “the right to control work,” “the right to discharge at will, without cause,” and “whether or not the work is a part of the regular business of the principal.” To the extent that the potential employment falls within one of the exceptions detailed in AB-5, the Borello test is still good law.
  • AB-2257, passed as an emergency measure on August 31, 2020, signed by Governor Newsom on September 4, and effective on that date, the bill exempted more than 100 categories of worker categories from AB 5, including freelance writers, photographers, videographers, photo editors, illustrators, journalists, individual musicians, the recording industry, and unions representing musicians and artists. To the extent that a category is so exempted, it would still be subject to Borello.
  • Proposition 22, which, of course, was passed favorably last November by California voters. The measure exempts those who work for and through “app-based” business enterprises, such as Uber, Lift, and Doordash [for my discussion of Proposition 22, as well as the other tests, click here].