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Supporters of AB5 saw a huge defeat on Election Day with the passage of Proposition 22, which allows companies like Uber and Lyft to once again operate with its workers classified as independent contractors rather than as employers, as AB5 had required. However, AB5 continues to impact many businesses, including those in California’s large trucking industry. A legal challenge to AB5 that will have a huge impact on the industry recently gave supporters of the law a boost.
On November 19, the California Court of Appeals ruled that the ABC Test set out in Dynamex, and codified through AB5, is not preempted by federal law. The case involved Cal Cartage Transportation and others who were sued by the Los Angeles City Attorney’s Office for misclassifying its workers as independent contractors and not as employees, as the ABC Test, arguably, requires. The argument that the test is pre-empted by federal law is one the companies in the case appeared to believe to be a strong one. It is also an argument being put forth in various other challenges to the law.
While the ruling is a setback for the trucking industry it is by no means final. The ruling itself can, and likely will, be appealed. Further, the California Trucking Association still has its own case pending in federal court, which is not required to follow the ruling just handed down by the California Court of Appeals. As such, while the ruling could be a harbinger of things to come, the trucking industry’s battle against AB5 continues.
With so much in flux, it is important for employers to have experienced employment and transportation lawyers on their side to navigate the current turbulent environment.