Trucking Group Loses Supreme Court Injunction Battle Over Worker Classification

Legal Analysis: CTA Now Faces ‘Almost Insurmountable’ Evidentiary Burden

The Supreme Court is allowing California’s strict worker classification law to take effect while legal challenges continue to swirl.

In a June 30 order list, the high court declined to hear an appeal from the California Trucking Association (CTA), which asked the court to stop California from implementing the worker classification law — better known as Assembly Bill 5, or simply AB 5.

AB 5 codifies an existing three-prong test — often referred to as the ABC Test — in order to classify a worker as an independent contractor. This rigorous test would upend the traditional contractor-client model in many industries, forcing companies to reclassify many contractors as employees.

The CTA sought a preliminary injunction to keep the 2019 law from taking effect until the case was decided, arguing that it would harm carriers and independent owner-operators in the trucking industry. It primarily based its legal challenge on a federal law — the Federal Aviation Administration Authorization Act (FAAAA) — that prohibits states from implementing any law or rule “related to a price, route, or service of any motor carrier … with respect to the transportation of property.”

While the CTA’s preliminary injunction found favor at the district court, the Ninth U.S. Circuit Court of Appeals reversed the decision, finding that the CTA was “unlikely to succeed on the FAAA preemption issue.”

The Supreme Court’s refusal to hear the matter means the district court will have to comply with the Ninth Circuit’s decision and lift the injunction, enabling California to start enforcing the law while litigation continues.

Evidentiary Burden

But the Ninth Circuit decision could affect more than just the injunction.

NSRMCA Executive Director Greg Reed noted that in reversing the district court’s preliminary injunction, the Ninth Circuit all but decided that AB 5 is not preempted by the FAAAA, leaving CTA an exceedingly narrow opportunity to prevail on that claim.

“In effect, CTA must now show that either AB 5 makes it impossible to operate as an independent contractor in the trucking industry or is so burdensome that it binds carriers to a specific price, route or service in their customer relationships,” Reed said.

Reed added that “the evidentiary burden will be almost insurmountable and will not be favorably received if the case ultimately goes up on appeal again.”

He noted that CTA will have the opportunity to advance its second legal theory — not presented to either the Ninth Circuit or the Supreme Court — that AB 5 violates the Commerce Clause by imposing impermissible burdens on interstate commerce. While Commerce Clause claims have previously prevailed in lawsuits concerning the trucking and transportation industries, Reed said “such claims are frequently unsuccessful.”

“Litigation will continue but trucking companies and independent owner-operators will be forced to change the operation of their businesses while they wait,” Reed added.