Cal. Trucking Ass'n v. Julie Su
903 F.3d 953
| 9th Cir. | 2018Background
- California Trucking Association (CTA) sued California Labor Commissioner Julie Su seeking a declaration that the FAAAA preempts the Commissioner’s use of the Borello common-law test to classify drivers as employees or independent contractors. CTA challenged application of Borello to owner-operators used by carrier members.
- CTA alleged owner-operators enter contracts treating them as independent contractors (provide truck, bear operating expenses, control acceptance of hauls, paid agreed rates). Commissioner applies Borello when adjudicating misclassification claims, which can alter contractual allocations (e.g., expense responsibility).
- District court dismissed CTA’s complaint under Rule 12(b)(6), holding Borello is not preempted by the FAAAA; CTA appealed.
- The Ninth Circuit reviews preemption de novo and affirms, holding Borello is a generally applicable common-law test in a traditional area of state regulation and is not “related to” motor carriers’ prices, routes, or services for purposes of FAAAA preemption.
- The court relied on precedent distinguishing background labor and welfare regulations (generally permissible) from state laws that directly dictate prices, routes, or services (preempted), and applied tests from Dilts, Mendonca, Rowe, Wolens, and Ginsberg.
Issues
| Issue | Plaintiff's Argument (CTA) | Defendant's Argument (Commissioner) | Held |
|---|---|---|---|
| Whether FAAAA preempts California’s use of the Borello common-law test to classify drivers | Borello application can displace freely bargained contract terms and impose state policy that alters carrier economics and service arrangements, undermining FAAAA deregulatory goals | Borello is a generally applicable background rule in traditional state labor regulation that permits inquiry behind labels to determine entitlement to labor protections | Borello is not preempted; it is not sufficiently "related to" prices, routes, or services to trigger FAAAA preemption |
| Whether Borello effectively compels carriers to use employees (vs. contractors) or dictates services at point of sale | Application of Borello may force reclassification that compels carriers to use employees and change operations/pricing | Borello does not, by its terms, mandate employee usage and is unlike categorical rules that require employees for certain services | Court: Borello does not compel use of employees and differs from mandatory local rules that were preempted (e.g., American Trucking) |
| Whether effects on carrier costs, routing, or scheduling from enforcing Borello are preemptive | Reclassification will alter expense allocation, scheduling, and incentives, thereby affecting prices/routes/services and should be preempted | Effects are indirect and analogous to prior upheld labor rules (meal/rest breaks, prevailing wage) that may raise costs but do not bind carriers to particular prices/routes/services | Court: Indirect cost or operational impacts are insufficient for preemption under Dilts and Mendonca |
| Whether federal legislative history or interstate parity concerns show Congress intended to preempt state worker-classification rules | CTA: Deregulatory purpose and parity support preemption of state rules that interfere with interstate carriers’ contractual arrangements | Commissioner: Legislative history contains no clear intent to preempt traditional state labor-protection mechanisms; many States had classification/prevailing wage laws when FAAAA passed | Court: Legislative history and precedent support non-preemption of generally applicable labor classification tests like Borello |
Key Cases Cited
- S. G. Borello & Sons v. Department of Industrial Relations, 769 P.2d 399 (Cal. 1989) (formulates California common-law multi-factor test for employee vs. independent contractor)
- Dynamex Operations W. v. Superior Court, 416 P.3d 1 (Cal. 2018) (adopts ABC test for wage-order context; distinguishes Borello’s continued applicability elsewhere)
- Dilts v. Penske Logistics, LLC, 769 F.3d 637 (9th Cir. 2014) (holds generally applicable labor rules not preempted by FAAAA where effects on prices/routes/services are tenuous)
- Californians for Safe & Competitive Dump Truck Transport v. Mendonca, 152 F.3d 1184 (9th Cir. 1998) (FAAAA did not preempt California prevailing wage law)
- Dan’s City Used Cars, Inc. v. Pelkey, 569 U.S. 251 (2013) (statutory text is primary evidence of congressional preemptive intent)
- Rowe v. New Hampshire Motor Transport Ass’n, 552 U.S. 364 (2008) (preemption where state law required carriers to provide specific tobacco-related delivery services)
- Northwest, Inc. v. Ginsberg, 572 U.S. 273 (2014) (state-law claims that would compel airlines to provide specific services or rates preempted)
- Am. Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (consumer-protection claims that force airlines to provide services beyond contract may be preempted; breach-of-contract claims enforcing parties’ bargains are not)