The California Trucking Association and various California owner operator truckers have lost their battle to avoid application of AB-5 to their businesses. On June 30, 2022 the U.S. Supreme Court declined to hear the controversy.
What is this controversy, and what are the implications for California truckers and the ports?
The California Trucking Association and several owner-operator truckers had filed a federal court action arguing that a federal law known as the Federal Aviation Authorization Act preempted AB-5. The 2019 California bill known as AB-5 provides that the “ABC test” defines the employment relationship in California. AB-5 essentially codifies the California employment relationship test that was adopted in the Dynamex Operations West v. Superior Court case by the California Supreme Court in 2018.
The U.S. District Court granted a preliminary injunction enjoining enforcement of AB-5 against any California motor carriers. That was appealed to the U.S. Court of Appeals, 9th Circuit. In a 2-1 decision on April 28, 2021 the 9th Circuit panel ruled that application of AB-5 to the California trucking industry was not preempted by federal law. That decision, California Trucking Association v. Bonta and the history of the ensuing appeal to the U.S. Supreme Court, can be found here:
The 9th Circuit panel held that AB-5 is a generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind or compel prices, routes, or services of motor carriers, so it is not preempted by the FAAAA.
And now the U.S. Supreme Court has refused to hear an appeal, so the door has closed on the truckers’ preemption argument. What happens next may have big implications for the California ports. Later in this post you can find a recent CBS-TV affiliate’s video piece on the issue.
The trucking industry adopted a different strategy than Uber, Lyft and the gig worker companies. Those ride-share companies used the initiative process and a tsunami of ad dollars to pass Prop 22, exempting certain gig platform workers from application of the ABC test. Of course, the future of Prop 22 is unclear, with proponents appealing an Alameda Couty Superior Court decision that declared it unconstitutional.
AB-5 has been applauded by California labor advocates as a major solution to mistreatment of workers and worker misclassification.
California owner-operator truckers and many of the trucking companies and logistics firms that contract with them are concerned that the truckers will not be found independent contractors, as they may fail to meet the ABC test due to part B, i.e. “The person performs work that is outside the usual course of the hiring entity’s business.”
Ports in California, including the major ports at LA/Long Beach and Oakland, are serviced by a large number of small trucking firms that haul metal shipping containers to and from the ports. Those shipping containers are filled with foodstuffs, finished goods and raw materials from American exporters
And those truckers, many of whom are owner-operators, pick up shipping containers as they are unloaded by crane from cargo vessels at the ports. From there they head to rail yards, warehouses, big box stores and factories in California and across the country.
For example, an independent trucker based in Stockton CA, picks up a reefer-box load of agricultural materials from Fresno County, hauling it to the Port of Oakland. Then while in Oakland the trucker picks up a shipping container at the port for delivery to a business in San Jose. Few of those truckers handle any of the booking, scheduling or paperwork themselves. Usually they own their own truck. They are not delivering to or from their own terminals. Those owner operators are often forced to endure long waiting delays at the ports.
We are all aware that after the pandemic there have been huge backlogs at the Port of LA/Long Beach and Oakland. Some economists believe that those backlogs are at least one component of inflationary pressures that are plaguing the U.S. economy.
It has yet to be tested in the courts, but under AB-5 those owner-operators may now be employees of the larger warehousing, trucking brokers, or trucking and logistics firms who hire them. That is making many of the warehousing companies, trucking brokers, trucking and logistics firms very nervous.
In the long run, many of the trucking owner-operators may secure better benefits as employees under AB-5. Or those who truly want to be independent may incorporate or explore other strategies.
But in the short term there is great concern at the ports over how this is going to work, what enforcement will look like etc. Some believe that this may add to delays at the ports until new arrangements can be worked out between owner-operators and logistics firms.
If the owner-operators are employees under AB-5 they may be covered by California workers’ comp, although in some circumstances the federal Longshore and Harbor Workers Act may cover their activity at the ports.
Readers of the blog can get a better handle on some of the current issues by viewing this TV report prepared by San Francisco station KPIX, which interviewed a number of truckers and logistics companies from the ports: