Recent rulings not the end of fight over Dynamex decision

By Mark Schremmer, Land Line associate editor | 4/12/2019

Proponents of the Dynamex decision earned another victory in late March as a U.S. district court dismissed the Western States Trucking Association’s challenge of California’s standard for classifying workers. However, the dispute over whether truck drivers should be considered employees or independent contractors is far from over. Western States has already indicated that it is prepared to take the case all the way to the U.S. Supreme Court.

In 2018, the California Supreme Court’s Dynamex decision established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that all of the factors are established:

  • A. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • B. That the worker performs work that is outside the usual course of the hiring entity’s business.
  • C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

The decision caused a stir in the trucking industry, and Western States, as well as the California Trucking Association, quickly filed lawsuits. The trucking groups argue that the B factor makes it impossible for a trucking company to hire an independent contractor to haul a load.

Western States contended that Dynamex was pre-empted by the Federal Aviation Administration Authorization Act, federal safety regulations, and the Commerce Clause.

Judge Morrison C. England Jr. for the U.S. District Court of the Eastern District of California ruled that the Dynamex decision does not create an excessive burden to interstate commerce.

“Western States’ claim that Dynamex invalidates the use of independent contractor drivers, and consequently affects interstate commerce is unavailing,” Judge England wrote. “California’s wage orders do not prohibit the use of such drivers. Instead, they simply provide a framework for establishing whether a given individual should be deemed an employee or an independent contractor.”

California Attorney General Xavier Becerra lauded the decision.

“This court ruling is a victory for truck drivers and all California workers who put in the time and labor at the behest of their employer,” Becerra said in a news release. “The courts have once again demonstrated that it is well with a state’s right to establish standards for those working within its borders.”

However, the ruling will not keep Western States from continuing its fight.

“The case sets up the question of how a trucking company can use independent trucking contractors without violating the B-prong of the ABC test,” Western States wrote in its online newsletter on March 29.

“We are looking forward to our legal arguments being heard on appeal. We will be perfecting the appeal shortly and remain committed to taking this question to the U.S. Supreme Court if necessary.”

Earlier in March, the U.S. Supreme Court decided not to review a previous ruling over whether federal law pre-empted California’s use of the Borello standard, which was the precursor to the ABC test. The California Trucking Association argued that the Borello standard disrupts the contractual arrangements between owner-operators and motor carriers, which is inconsistent with Congress’ deregulatory goals under the Federal Aviation Administration Authorization Act of 1994.

The F4A prevents a state from enacting or enforcing “a law, regulation, or other provision having the force and effect of law related to a price, route, or service any motor carrier … with respect to the transportation of property.”

In Judge A. Wallace Tashima’s opinion for the Ninth Circuit, however, he wrote that the Borello standard is not related to prices, routes or services and therefore is not pre-empted by federal law.

After the U.S. Supreme Court elected not to hear the case, the California Trucking Association said it would focus on fighting the Dynamex decision.

“The misclassification issue and the ability for truckers to be independent contractors continues,” California Trucking Association CEO Shawn Yadon said in a statement. “We remain hopeful our legal challenge to California’s more recent Dynamex ruling, which is an essential outright ban on independent contracting, will demonstrate to the court the dire impact the state’s quest to eliminate small-business trucking will have on interstate commerce.”

While similar to Western States’ case, the California Trucking Association said its lawsuit shows that the Dynamex decision affects routes and services, as well as prices.

“(The) WSTA (court) dismissed the plaintiff’s challenge to Dynamex under the (F4A), concluding that ‘the mere fact that increased costs may result does not trigger pre-emption,’” the California Trucking Association wrote in its response filed in the U.S. District Court for the Southern District of California on April 3. “But even if that is true, it is of no relevance here, where plaintiff’s first-amended complaint contains well-pleaded factual allegations plausibly suggesting that application of Dynamex ‘directly impacts’ not only prices but also the services and routes that CTA’s members offer their customers.”

The California Trucking Association added that it believes it “will be able to prove that the Dynamex rule imposes very significant burdens on interstate commerce.”

 

 

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