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Federal Judges Slow California Policy Overreach

Restrain Arbitrtion Ban, AB 5 for Owner/Operator Truckers

Bryan LIttle, Farm Employers Labor Service

Jan. 2, 2020 (Updated Jan. 16, 2020)

Two California-based Federal judges, in separate actions, enjoined actions of the California Legislature as over-reaches preempted by Federal law.

 On New Year’s Eve, Judge Robert Benitez of the U.S. District Court for the Southern District of California issued a temporary restraining order (TRO) in a lawsuit brought by the California Trucking Association seeking to overturn AB 5 with respect to motor carrier operators.  Judge Benitez’ order constrains California General Xavier Becerra and other agencies of the California state government from enforcement of Assembly Bill 5 (AB 5) with respect to determination of appropriate classification of providers of services as employees or independent contractors for purposes of enforcement of the Labor Code, the Unemployment Insurance Code and Industrial Welfare Commission Wage Orders within the motor carrier industry.

AB 5, passed by the California Legislature in 2019, becoming effective on Jan. 1, 2020, sets forth stringent criteria which the relationship between a service provider and a service receiver must meet for the service provider to be considered an independent contractor rather than an employee. 

In his temporary restraining order, Judge Benitez found:

  1. Federal law (the Federal Aviation Administration Authorization Act, or FAAAA) likely preempts AB 5 because FAAAA “prohibits any state from enact[ing] or enforc[ing] a law, regulation or other provision having force and effect of law related to a price, route or service of any motor carrier… with respect to transportation of property.”
  2. Operation of AB 5’s “prong B” test (requiring an independent contractor perform work that is outside the usual course of the hiring entity’s business) effectively mandates that motor carriers treat owner-operators as employees rather than independent contractors.
  3. The Plaintiffs established that imminent, irreparable harm is likely, requiring motor carriers to restructure their operations to treat independent owner-operators as employees.
  4. That the Plaintiffs have “carried their burden for purposes of emergency relief to show (1) that they are likely to succeed on the merits, (2) likely to suffer irreparable harm in the absence of relief, (3) that the balance of equities tips in their favor, and (4) that their requested relief is in the public interest.”   

Bear in mind that Judge Benitez’ order applies only to motor carriers, though other litigation seeking to overturn AB 5 is pending.  Please see FAQ on AB 5 Worker/Contractor Standards at the California Farm Bureau’s website for more information about how AB 5 impacts agriculture.

(Editor's Note: On Jan. 16, 2020, Judge Benitez granted a permanent injunction barring the State of California from enforcing AB 5 against motor carriers.)

AB 51, California’s attempt to limit the use of workplace arbitration agreements won’t go into effect in January thanks to a federal judge’s Dec. 30 order.  The U.S. Chamber of Commerce and other business groups raised serious questions about whether the Federal Arbitration Act preempts the state’s employment arbitration law, U.S. District Judge Kimberly Mueller said in her order granting a temporary restraining order against the law.  California’s restriction on workplace arbitration would prohibit employers from requiring that job applicants or workers sign arbitration pacts as a condition of employment. That represents a departure from other states’ tactic of declaring that agreements to arbitrate certain types of claims are invalid.

 Although just a temporary restraining order, the ruling deals a blow to a state statute on arbitration designed to pass legal muster where others failed. Mueller will hear the business groups’ motion for a preliminary injunction Jan. 10.