United States: California's AB 5 Enjoined As To Motor Carriers; Federal Court Enters Preliminary Injunction On FAAAA Preemption Claim

On January 16, 2020, the U.S. District Court for the Southern District of California entered an order granting a preliminary injunction requested by the California Trucking Association (CTA), which was represented by Ogletree Deakins shareholders Robert R. Roginson, Alexander M. Chemers, and Spencer C. Skeen, in a matter challenging Assembly Bill (AB) 5 as to motor carriers operating in California.

The preliminary injunction enjoins California agencies, including the Office of the Attorney General, the Labor and Workforce Development Agency, the Department of Industrial Relations, the Labor Commissioner's Office, and the Employment Development Department, from enforcing AB 5's ABC test, as set out in Cal. Labor Code § 2750.3(a)(1), as to any motor carrier operating in California, pending the entry of a final judgment.

On December 31, 2019—the eve of AB 5's effective date of January 1, 2020—the court issued a temporary restraining order (TRO), and, on January 13, 2020, Judge Roger T. Benitez left in place the TRO enjoining the enforcement of AB 5 following the oral argument on the preliminary injunction motion. The court agreed with CTA that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) likely preempts part of AB 5's new independent contractor test. Specifically, CTA claimed that the FAAAA preempted the second prong of the ABC test adopted in AB 5—which analyzes whether a person performs work that is outside the usual course of the hiring entity's business.

In issuing its preliminary injunction preventing the State of California from enforcing AB 5 as to motor carriers, the court recognized that California was impermissibly encroaching on Congress's territory by eliminating motor carriers' choice to use independent contractor drivers. As the court noted, "[w]ith AB-5, California runs off the road and into the preemption ditch of FAAAA."

Ogletree Deakins will continue to report on any further news regarding AB 5 on its Trucking and Logistics and California State Developments blogs.

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