California AB5 Litigation Update

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The Grawe Gazette – General Counsel

California AB5 Litigation
By The Grawe Group, LLC, May 2021

Last week news broke of the 3-judge panel of the 9th Circuit Court of Appeals lifting the injunction against California’s enforcement of AB5 and its version the ABC test. The California Trucking Association is attempting to cut off California’s ability to enforce its version of the ABC test by arguing federal law pre-empts California’s ABC test. The CTA had won an injunction pending the completion of CTA’s lawsuit against the state, but this week the judges lifted the injunction.

What to know:

  • This is not good obviously, but all is not lost. AB5 can still be defeated as it relates to trucking, but there is a lot of litigation to go before that happens.
  • The CTA has options. They can appeal the decision to the full 9th circuit court of appeals or to the U.S. Supreme Court. They can go to trial. Or they can pursue a few other strategies.
  • California will be able to start enforcing its version of the ABC test against trucking companies sometime this summer. We must assume California will do so.
  • Cal Cartage has a lawsuit going right now with California centering on the same issue as the CTA case: does federal law (specifically the “FAAAA”) pre-empt California’s ABC test if California’s test effectively eliminates independent contractors in the trucking industry?
  • It is likely that question will have to be answered by the U.S. Supreme Court, whether it happens in the CTA case or the Cal Cartage case. Until then California will try to enforce its ABC test and litigation will ensue.
  • California will argue its ABC test applies to any drivers that live in California, drivers for companies based in California, and drivers that regularly (think dedicated, routine, or consistent runs) drive in California. And California has made attempts to bring claims against brokers arguing brokers misclassify one-truck motor carriers as independent contractors as well, so California may resurrect those efforts as well.

What to do:

  • If you have independent contractors that live or operate in California, if you have California facilities, or if you have independent contractors that operate regularly in California you need to dust off your contingency plans.
  • If AB5 remains in effect for California, and if it spreads beyond California, and if you have impacted independent contractors your business model may need a redesign such as turning into a broker or abandoning independent contractors.
  • Support the efforts to push back against AB5. Support the trade associations like the CTA, the ATA, the TCA, the CLDA, and more fighting these laws in court and in legislatures.

If you have any questions about your independent contractor model, the ABC test, or these significant lawsuits we can help you navigate these challenges.

 

The Grawe Group, LLC is a professional services firm focused on the transportation and logistics industry. With a team of experienced executives, we provide general counsel services, business consulting, and managed professional services specific for the industry. From legal and risk management matters, to operational, financial, and executive challenges, the Grawe Group has the consulting, management, and legal expertise in trucking and logistics to help you build sustainable success. www.thegrawegroup.com