The latest brief by the Owner-Operator Independent Drivers Association in its last-ditch battle against California’s AB5 independent contractor law is a mix of apocalyptic projections about the fate of leased owner-operators and complex arguments about state versus federal regulation and the interstate commerce clause of the Constitution.
The OOIDA argument is narrower than the now-abandoned effort by the California Trucking Association that looked to invalidate all of AB5 under the issue of federal preemption of state laws. For example, in its concluding argument, OOIDA says the 9th U.S. Circuit Court of Appeals should invalidate AB5 and “enjoin the enforcement of AB5 against independent truck drivers who operate in interstate commerce.” The group argued that “such a holding would protect interstate commerce while preserving [California’s] interest in applying its employment protections to local California truck drivers.”
The 9th Circuit already rejected the CTA’s arguments against AB5 in April 2021. OOIDA was not a plaintiff in that suit but joined as a plaintiff later. There are distinct differences in what CTA argued then and what OOIDA is arguing now.
Before getting into its legal arguments, OOIDA offers dire projections of what will happen to leased independent owner-operators under AB5. However, that comes against a backdrop of there being no clear sign that trucking capacity has tightened since summer 2022, when AB5 came into effect for the state’s trucking community after the original CTA effort to overturn it stalled at the U.S. Supreme Court.
One of the most basic measurements of trucking capacity, SONAR’s Outbound Tender Reject Index, since as this chart shows not shown any normous divergence since mid-2022 between the rate for the entire U.S. and that of Ontario, the city in Southern California’s Inland Empire that is the home of a huge number of warehouses stocked with goods waiting for transport to other parts of the U.S. after arriving at the Ports of Long Beach and Los Angeles. The Ontario OTRI is represented by the yellow line.
Where are the enforcement actions?
Trucking industry personnel in California have noted they are surprised by the lack of any visible action taken via private lawsuit or government action that seeks a misclassification ruling under AB5.
For example, this 2022 tweet from the state’s labor commissioner urged truckers who believed they were being improperly classified under AB5 to contact the commissioner’s office, which could launch an investigation. But no known action has been taken against a trucking company by that office for violations under AB5.
In arguments that mirror what OOIDA first filed with the appellate court in August, the organization sees AB5 as so restrictive that it will effectively ban in the state the use of independent owner-operators leased on to carriers. Its latest brief is in response to the November filing by the state’s attorney general’s office, which is the defendant in the lawsuit.
“[The state avoids] either admitting or denying OOIDA’s contention that AB5’s ABC test prohibits the operation in California of leased owner operators,” OOIDA writes in its brief filed with the court the day after Christmas. “But AB5 would even prohibit leased owner operators based outside of California from entering and exiting merely to pick up or haul freight into or out of the state. AB5’s elimination of this entire category of businesses far exceeds the types of burdens that courts have found reasonable under the dormant Commerce Clause.”
There is no specific prohibition in AB5 against owner-operators in trucking, whether they are leased on to a company or hauling contract or spot business without a lease. The issue with AB5 in trucking, as it always has been since it became law for the entire state at the start of 2020 is the B prong of the ABC test in AB5.
AB% didn’t become law for trucking until after an injunction the CTA originally won at the start of 2020 fell victim to the legal process that culminated with the Supreme Court’s denial of certiorari in 2022. The OOIDA case is a continuation of that case, but without CTA, the original plaintiff.
The B prong says a worker can be an independent contractor if he or she “performs work that is outside the usual course of the hiring entity’s business.”
OOIDA responds to that in its latest brief by saying “by definition, the work performed by a leased owner-operator, i.e., providing truck transportation of freight, is inevitably within ‘the usual course of the [motor carrier]’s business,’” quoting its president, Todd Spencer, from an earlier legal declaration in the case.
“That these leased owner operators may have the opportunity to work as or under a different legal entity in the trucking industry – like an employee driver or motor carrier – does not refute OOIDA’s basic premise,” the organization’s brief said. “AB5 closes California’s borders to an entire class of small businesses in the trucking industry … nearly 600,000 nationwide.”
Among the key legal points made by OOIDA:
- A state argument that OOIDA interprets as lumping together different types of drivers as essentially the same does not accurately portray reality in the industry, OOIDA writes in its brief. An independent owner-operator on a lease to a carrier, an employee truck driver and a small fleet owner operating with federal authority “are distinct segments of the trucking industry with significantly different responsibilities and statutory and regulatory obligations,” OOIDA said. “They are not simply different truck driving jobs.” Given that, “there is no cost, compliance or otherwise, that leased owner operators can bear to keep their small businesses as independent contractor drivers for motor carriers.”
- The OOIDA argument rests in part of a legal precedent called the “Pike balancing test.” In a webpage published by Professor Leora Harpza of the Western New England University School of Law, she defined the Pike balancing test – from the name of the plaintiff in a 1970 case – as holding that a state law’s potential conflict with interstate
- commerce can be upheld “so long as the burden it imposes is not excessive in relation to its value as a health, safety, environmental protection or consumer protection measure.” The OOIDA argument relative to Pike is, one, that AB5 works to restrict leased owner-operators from out of state from working in California, and two, the state has never made a case why it has a compelling interest in classifying out-of-state workers as employees rather than independent. Instead, OOIDA argues that much of the focus of AB5 was on drayage workers operating out of the state’s ports. In a passage that most certainly would not have shown up in a CTA brief from when it was a plaintiff in the case, OOIDA writes that “it is aware of the abuse and misclassification that drivers at the ports have faced and Defendants’ goal of remedying these issues with AB 5. But OOIDA’s AB 5 challenge focuses on obtaining relief for truckers operating in interstate commerce, especially those from out of state.” That drayage misclassification “is not relevant to resolve whether the State would enjoy any benefit from enforcing AB 5 on interstate truckers, particularly with respect to those based outside of California.”
- If AB5 applies to out-of-state drivers, which OOIDA argues it does, it is discriminatory against those carriers, according to the OOIDA brief. California-based carriers can spread the costs of complying with AB5 across a larger base of in-state business, the group said. “The economies of scale give California trucking businesses the ability to spread out AB 5’s increased costs over the majority, if not all, of their work occurring in California,” the brief said.
- The “get out of jail” card that is in AB5’s business-to-business exception is a multipart test that was designed to enable an independent contractor to be hired even in the face of the AB5 restrictions. But OOIDA argues that for owner-operators leased on to a carrier, there are provisions in the B2B exception that are in clear conflict with federal leasing laws. “Accordingly, because the federal rules apply to all lease agreements between interstate motor carriers and owner-operator drivers, the B2B exemption discriminates against all leased owner-operators operating in interstate commerce and is unconstitutional,” OOIDA wrote in its brief.
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