A decision by a federal appeals court on Monday could allow California to begin enforcing its independent contractor law over the trucking industry in as soon as one week.
In a 2-1 decision, the U.S. Court of Appeals for the 9th Circuit denied a petition filed last month by the California Trucking Association (CTA) for an en banc rehearing of the court's April decision that removed a lower court's injunction exempting the trucking industry from the independent contractor law known as AB5. The injunction had been in place since January 2020.
In denying CTA's request, the appeals court stated that the group's petition "was circulated to the judges of the court, and no judge requested a vote for en banc consideration."
As previously reported by FreightWaves, a seven-day clock formalizing the decision reached by the appeals court in April that lifted the injunction begins when a denial in the en banc decision is handed down. However, if CTA decides to appeal to the U.S. Supreme Court, there is a possibility that the lifting of the injunction could be stayed while the high court decides whether to take the CTA case.
CTA was not immediately available to comment on any next moves.
The part of AB5 that is problematic is the so-called B prong. Under that provision, a worker who is hired to perform a function that is at the heart of what the company does — like a trucking company hiring an independent owner-operator of a truck — should be considered an employee. A trucking company hiring an outside accountant, for example, would not fall under the B prong.
In granting the injunction, the district court in early 2020 agreed with the CTA's argument that AB5 was in conflict with the Federal Aviation Administration Authorization Act, a 1994 law that the CTA argued blocked AB5 because of potential impact on "rates, routes and services."
The American Trucking Associations, the Western States Trucking Association and the Owner-Operator Independent Drivers Association (OOIDA) all filed briefs with the court in support of CTA's rehearing request. Their arguments came down to the same fundamental legal logic: that AB5 is a state law that impacts prices, routes and service, which the 1994 Federal Aviation Authorization Administration Act specifically said was not permitted and would be in conflict with the federal rule.
OOIDA further stated that AB5 "eliminates an entire category of motor carriers who rely upon independent owner-operators to do business and, therefore, subverts Congress's intent to allow the market to dictate how motor carriers provide trucking services, to preserve and strengthen the independent owner-operator driver business model, and to preempt such pervasive state regulation."
OOIDA also warned that because such a large part of U.S. trucking relies on business going to and from California, "the impact of AB 5 would have a far-reaching and immediate negative effect on a large part of the country's economy."
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