California’s attorney general has fired back at the Owner-Operator Independent Drivers Association in a federal appeals court, saying OOIDA’s arguments against the state’s independent contractor law, AB5, are “simply wrong in asserting [that the law] … effectively prohibits an entire sector of small business truckers from operating in California.”
OOIDA is alone now in the legal battle against the imposition of AB5 against trucking. The California Trucking Association launched the original lawsuit in 2019 that for about 2 1/2 years, on the back of a lower court injunction that was kept in place even as the appellate process rejected that injunction, kept AB5 from being implemented against the state’s trucking sector. But that organization pulled out of the current appeal earlier this year.
OOIDA joined the CTA as a plaintiff in 2022; what is occurring now before the 9th U.S. Circuit Court of Appeals traces back to that original CTA lawsuit.
AB5 is the state’s 2019 independent contractor law. Through its “ABC test” – the B prong in particular for trucking – it is seen as making it difficult to define a worker as an independent contractor, even among truck drivers who consider themselves to be in that category.
OOIDA filed its original arguments in the appeal in August, just about the time CTA was pulling out of the case. The appeal comes after the March decision by the U.S. District Court for the Southern District of California that AB5 could be implemented in the state’s trucking sector.
Dormant Commerce Clause is the OOIDA argument
The independent drivers’ trade association is making its argument on appeal over the issue of the Dormant Commerce Clause. While the Commerce Clause in the Constitution (Article 1, Section 8) grants Congress the ability to regulate interstate commerce, the Dormant Commerce Clause has come to be regarded as a less specific and not explicit prohibition against states interfering with interstate commerce.
The OOIDA argument goes to the issue of the Pike balancing test, from a 1970 decision with a lead plaintiff named Pike.
In a published summary of Pike more than 10 years ago, a professor at a New England law school described it as being invoked when a court “weighs the burdens on interstate commerce as against the local benefits.”
“OOIDA’s principal contention is that the ABC test violates the standard set in Pike,” the California attorney general’s office wrote in its brief submitted last week. But according to the brief, “both this court and the Supreme Court have made clear that state laws do not trigger Pike balancing merely because they impose increased regulatory costs.”
And the state not surprisingly rejected the OOIDA’s contention that the ABC test at the heart of AB5 “effectively prohibits an entire sector of small business truckers from operating in California.”
An argument the state repeatedly has made in filings over the years is that the basic contention that AB5 effectively bars the owner-operator model in California is wrong. Early in its latest filing, the California AG’s office says the same thing, again.
Independents can do their thing
“Motor carriers can continue working with owner operators – drivers who own their own trucks – much as they did before AB5’s enactment,” the state wrote. “To the extent that the ABC test requires carriers to classify owner-operators as employees, the only legal consequence is that owner-operators are now entitled to receive a minimum wage, workers’ compensation and other employment protections and benefits.”
The Pike balancing test, the state said, is violated only “where the burdens are clearly excessive in light of the challenged law’s benefits.”
To challenge the idea that AB5 is excessively burdensome, the state needed to describe the situation that led to the law’s being enacted in the first place in 2019.
“Before AB5, numerous sectors of California’s economy, including the trucking industry, were rife with misclassification,” the state wrote. Misclassification allowed employers to “skirt important labor and employment protections.”
The Dormant Commerce Clause claim was not addressed in the legal proceedings involving the initial CTA lawsuit. The CTA argument that prevailed in the injunction and which was then overturned on appeal was over whether the combination of AB5 and trucking ran afoul of a federal law, the Federal Aviation Administration Authorization Act. But that issue is dead, killed by the 9th Circuit appellate court after the U.S. Supreme Court declined to review the case, which led the District Court to recognize that precedent when the case came back to the lower court.
The OOIDA argument also involves an interpretation of AB5 and its relationship to Pike that interstate drivers operating in California are unfairly burdened by the law.
Citing a Supreme Court decision that came down just last year, California said “only a small number of cases have treated genuinely nondiscriminatory burdens as substantial” in applying the Pike test.
California’s lengthy arguments against the OOIDA argument over the Pike balancing test can be summed up in the section head of one of its arguments: “State laws rarely violate Pike’s balancing standard.”
“OOIDA seeks declaratory and injunctive relief that would block application of the ABC test to every corner of the diverse trucking industry,” the state wrote. Citing a precedent, the AG brief says that “to obtain such sweeping relief, OOIDA must establish that no set of circumstances exists under which the ABC test could validly be applied to the trucking industry.”
For example, the state argues, “OOIDA failed to show that the ABC test would be invalid as applied to drivers in other segments of the industry” besides independent owner-operators. It cited drayage and FedEx drivers as examples.
And as for independent owner-operators, the state argues they can still drive in California if they are hired under the controversial business-to-business exemption, which is seen as a high standard to meet, or by becoming employees.
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