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SCOTUS Denies Review of AB 5 Challenge

Bryan Little, Farm Employers Labor Service

June 30, 2022

On June 30, the U.S. Supreme Court denied a petition to review the applicability of California’s AB 5 “ABC” test to owner-operator trucking in California.  The preliminary injunction that had prevented enforcement of AB 5 in this situation will be lifted within seven days.  The petition had been filed by the California Trucking Association (CTA).  Denial of the petition and the lifting of the injunction jeopardizes the owner-operator model of truck freight transportation in California, likely compounding shortages of freight transportation as California ag exports are snarled in ports and port operators and longshore unions are embroiled in contract negotiations that could result in a west coast ports strike this summer.  CTA had contended that AB 5 is preempted by the federal law prohibiting state regulation of prices, routes and services of motor carriers.

AB 5 (Gonzales, 2019), intended to discourage employers from misclassifying employees as independent contractors, is problematic for the owner-operator trucking model, which is common elsewhere in the U.S., because it imposes a three-factor test to determine the legality of a contractor relationship that many if not most owner-operators cannot meet.  The three-factor test include the “A” factor – that a worker is free of the direction and control of the hirer; the “B” factor -- that the work is outside the usual course of the hiring entity’s business; and the “C” factor – that the worker is customarily engaged in an independently established trade or occupation.  The “B” factor will be most problematic for owner-operator truckers and the motor carriers who would otherwise contract with them to move freight.

When the CTA’s petition was filed in 2019, CTA said AB 5 “threatens the livelihood of more than 70,000 independent truckers.”  While it’s difficult to predict the fallout of this situation, it seems likely that taking 70,000 truck drivers out of the trucking industry, stranding substantial investments in equipment they can no longer use, and forcing them to transition into employment by motor carrier companies will cause significant disruptions.