The Supreme Court turned away a challenge to California’s “radical” worker-classification law that virtually outlaws freelancing.
The law bans independent contracting, including independent trucking, and clamps down on the so-called gig economy.
The ruling has the effect of ending a temporary stay preventing enforcement of the law, known as AB5, against motor carriers while the appeal to the Supreme Court was pending.
AB5 was intended to give transport workers more workplace protections, but for truckers who own and operate their own rigs, they said it may be the end of the road.
The U.S. Court of Appeals for the 9th Circuit previously denied the challenge to the law, finding the law wasn’t preempted by the Federal Aviation Administration Authorization Act of 1994, which was created to prevent states from undermining federal deregulation of the trucking industry by imposing regulations of their own.
The law is deeply unpopular in California’s struggling business community.
Paul Brashier, Vice President of ITS Logistics, a commercial transport company, said in a statement:
“This ruling really took everybody off-guard, especially at the speed that they kicked this back and essentially made it law.”
The problem is that nearly all of the state’s goods are transported by truck, many of which are owned and operated by individual drivers.
That’s especially the case at the Port of Oakland.
Bill Aboudi, the owner of AB Trucking in Oakland, said:
“There’s 9,000 trucks that serve the port on a daily basis, and 90% of them are independent contractors. So, this is a big, big impact.”
Aboudi employs his own drivers but also uses independent contractors to handle overflow business, which he just said became illegal. Aboudi says he won’t be able to use trucks owned by the drivers anymore.
Here’s how ‘Freight Waves’ explain it:
“Most immediately, motor carriers must evaluate and adopt alternative operating models to mitigate risk if they intend to continue to do business in California” was the admonition from the Benesch law firm in the wake of the Supreme Court decision in the case of California Trucking Association vs. (state Attorney General) Bonta. The decision opens the door for the imposition of AB5, the law on independent contractors that leans heavily toward classifying workers as employees rather than ICs.
“Motor carriers should immediately evaluate their California operations to determine what steps, if any, should be taken to respond to the changed backdrop for trucking” was the call to action from the trucking-focused Scopelitis law firm.
On the other side of the divide, there was a celebration, including a victory lap by Lorena Gonzalez, the former and future labor leader who successfully pushed for AB5’s passage in the California legislature in 2019.
The fact that trucking companies will have to abide by basic labor laws in CA takes us one step closer to rebuilding the middle class that was almost deregulated out of existence. Proud of my @Teamsters union, #defendingDynamex hasn’t been easy… but nothing good ever is. #AB5
— Lorena Gonzalez Fletcher (@LorenaSGonzalez) June 30, 2022
“The fact that trucking companies will have to abide by basic labor laws in CA takes us one step closer to rebuilding the middle class that was almost deregulated out of existence,” Gonzalez said in a tweet.
In denying a review of the appellate court decision, the Supreme Court returned the case to the 9th U.S. Circuit Court of Appeals. A 9th Circuit ruling in 2021 overturned a lower court injunction that had kept AB5 at bay from California’s trucking sector, even as the law that seeks to define independent contractors was implemented in other parts of the economy.
The original injunction from the lower court was based on its conclusion that AB5 was in conflict with provisions in the Federal Aviation Administration Authorization Act of 1994 (F4A). Attorneys for the trucking industry were heartened when the court agreed to consider questions of state preemption of F4A, including looking at a case involving C.H. Robinson (NASDAQ: CHRW). But ultimately, the court failed to take up both the CTA and C.H. Robinson cases.
The appellate court had allowed the injunction against the law to remain in effect while the CTA pushed to have the Supreme Court hear its appeal. With that denied, the stay is expected to be lifted within days and AB5 will go into effect, retroactively, to Jan. 1, 2020. That creates the prospect of litigation or state action for past actions.
You can continue reading the original piece here: Freightwaves