Truckers Appeal California AB 5 Independent Contractor Limitations to the Supreme Court

Motor carriers in California commonly use independent contractors who own and operate their own rigs to haul freight. Under AB5, motor carriers would have to re-evaluate under a three-part test whether to consider these workers employees or independent contractors. This could require employers to entirely restructure the employment relationship they have with their drivers. It would also impact drivers who may have invested quite a bit to acquire their own equipment, allowing them to maintain independent contractor status and be self-employed. The bill was initially challenged by the California Trucking Association (“CTA”) in the Southern District of California, where the court issued an injunction preventing the enforcement of AB5 against motor carriers.

The Ninth Circuit Court of Appeals reversed the district court’s ruling which barred the enforcement of California’s AB5 to motor carriers in May of this year, and the CTA has since continued to pursue their challenge of the bill. The decision by the Ninth Circuit allows for AB5 to once again be applied and enforced against motor carriers and the trucking industry. After this ruling, the CTA first sought rehearing of the case before the entire judicial panel of the Ninth Circuit, also known as an en banc review. On June 21, 2021, the Ninth Circuit denied the CTA’s petition for re-hearing.

On June 23, 2021, the Ninth Circuit granted CTA’s motion to stay the appellate ruling until after the Supreme Court of the United States decides whether to grant or deny CTA’s petition for writ of certiorari, or request for review. The effect of this order is that it allows the district court’s preliminary injunction that barred the enforcement of AB5 against motor carriers to temporarily stay in place.

Finally, the CTA has declared its plans to file a petition for review before the Supreme Court. Under special “pandemic” timing rules, CTA has an extended period - up to 150 days - to file for review. Even once filed, it is still not a given that the Court will hear the case. At least four Justices must agree in order to grant the petition for review. Whether the Supreme Court takes this case is still a matter of discretion, so predicting whether the petition in CTA’s case will be granted remains unclear. However, CTA’s case has factors that weigh heavily in favor of review. For instance, the Court commonly reviews cases containing important federal questions. CTA argues that AB5, if enforced against the trucking industry, would have implications for the national supply chain. CTA has further argued in the lower courts that AB5 is preempted by federal law under the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”), indicating strong Commerce Clause and Supremacy arguments. Additionally, the Ninth Circuit decision to allow AB5’s enforcement against motor carries creates a circuit split, meaning at least one other Circuit Court of Appeal has held the opposite way, putting the two decisions at odds with one another. The Supreme Court commonly takes cases where it is necessary to resolve these splits among the circuit courts.

If the Court declines to hear the case, the Ninth’s Circuit’s mandate will lift the preliminary injunction immediately, and AB5 will immediately go into effect for motor carriers. If the Court takes the case however, the stay will remain in place until a decision is rendered. Then, if the Supreme Court favors the arguments advanced by the CTA, it would place motor carriers and the trucking industry in an exempted category and out of AB5’s reach.