A federal district court in southern California issued a temporary restraining order on New Year’s Eve barring the enforcement of the state’s Assembly Bill 5, set to go into effect on New Year’s Day. AB 5 adopted the “ABC test” to determine if a particular worker is an independent contractor or an employee. The test hits particularly hard on the motor carrier industry, because many trucking companies use legitimate independent contractors – owner-operators – as part of their business model. The court’s decision was compelled largely because under the Federal Aviation Administration Authorization Act (“FAAAA”), states are not to enact or enforce their own laws related to a price, route, or service of any motor carrier regarding transportation of property. The TRO applies only to the motor carrier industry.
The ABC test presumes that a worker is an employee, not an independent contractor. The hiring party can rebut that presumption only if it can establish each of three factors:
- The person is free from the control and direction of the hiring party in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Rebutting the presumption is virtually impossible for a motor carrier, because it cannot meet Prong B. The owner-operator will always be within, not outside, the usual course of business of the hiring motor carrier. Thus, the California Trucking Association and several members of the industry brought the legal challenge.
Judge Benitez granted the TRO, holding that the plaintiffs had met their burden to show 1) they are likely to succeed on the merits, 2) they are likely to suffer irreparable harm in the absence of relief, 3) the balance of the equities tips in their favor, and 4) the requested relief is in the public interest.
Although this is a very preliminary victory, it signals what may come from Judge Benitez on the motion for a preliminary injunction and, ultimately, the outcome of the case at the trial level. There is still a long road to travel, but this outstanding beginning sends a signal to the states that the Congress has a preemptive role in motor carriers’ business regulation. Notably, New Jersey has just enacted legislation adopting the ABC test, and for the same reasons as are evident in California. Will New Jersey’s legislation, too, be found to interfere with Congressional regulation of motor carriers? We will be watching.