People Ex Rel. Harris v. Pac Anchor Transportation, Inc.
59 Cal. 4th 772
| Cal. | 2014Background
- Pac Anchor Transportation and its owner/dispatcher Alfredo Barajas operated a trucking business and classified drivers as independent contractors though drivers lacked capital, trucks, DOT authority, other customers, and control over operations.
- The State (People) sued under California’s Unfair Competition Law (UCL), alleging misclassification and violations of unemployment insurance, tax withholding, workers’ compensation, wage statement, reimbursement, and minimum wage laws, seeking injunctions, penalties, and restitution.
- Defendants moved for judgment on the pleadings, arguing federal preemption under the Federal Aviation Administration Authorization Act (FAAAA), which bars state laws "related to a price, route, or service" of motor carriers with respect to the transportation of property.
- The trial court granted defendants’ motion relying on prior state appellate authority; the Court of Appeal reversed, and the California Supreme Court granted review.
- The Supreme Court held the FAAAA does not preempt the People’s UCL action: generally applicable labor and employment laws (and a UCL claim based on them) are not facially preempted, and as applied here the People’s enforcement does not sufficiently "relate to" prices, routes, or services of motor carriers with respect to transportation of property.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAAAA preempts a UCL action premised on state labor/insurance laws applied to a motor carrier | State may enforce generally applicable labor laws via the UCL; those laws do not regulate prices, routes, or services of motor carriers | FAAAA preempts any UCL claims against motor carriers because enforcement will affect carriers' prices, routes, or services | FAAAA does not facially preempt the UCL; as applied here, the UCL claim is not preempted |
| Whether UCL is facially preempted as a law of general application | UCL enforcement of general employment laws is outside FAAAA’s scope | UCL claims inherently regulate competition and thus carrier prices/services and are preempted | UCL is not facially preempted; laws of general application are outside FAAAA’s reach |
| Whether the specific statutes underlying the UCL claim "relate to" transportation of property | The cited Labor Code and Unemployment Insurance provisions regulate employers generally and do not concern transportation services/prices | Enforcement would force reclassification of drivers, increasing costs and altering services, so it "relates to" prices/routes/services | The statutes relied on are general employment laws; any effect on carrier prices/services is indirect/too remote to trigger preemption |
| Whether applying UCL here would frustrate FAAAA’s deregulatory purpose | Enforcement ensures proper classification without dictating services; Congress didn’t intend to exempt carriers from general labor laws | Enforcement would impose entry controls or market-distorting commands contrary to FAAAA | Application here does not substitute state commands for market forces and does not undermine FAAAA’s purpose |
Key Cases Cited
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992) (state actions that reference or produce enforceable rights to fares are preempted under ADA/FAAAA)
- American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (state consumer-protection enforcement can be preempted when it serves to police marketing practices tied to price/service)
- Rowe v. New Hampshire Motor Transp. Assn., 552 U.S. 364 (2008) (FAAAA preempts state law that would force carriers to provide services significantly different from market offerings)
- Dan’s City Used Cars, Inc. v. Pelkey, 569 U.S. 251 (2013) (state-law claims are not preempted where they do not concern a carrier’s transportation of property)
- Fitz-Gerald v. SkyWest, Inc., 155 Cal.App.4th 411 (2007) (held ADA preempted UCL wage claims; disapproved by this Court)
- Mendonca v. Californians for Safe Dump Truck Transp., 152 F.3d 1184 (9th Cir. 1998) (FAAAA does not preempt generally applicable prevailing wage laws when applied to carriers)
- Dillingham Constr., N.A., Inc. v. California Div. of Labor Standards Enforcement, 519 U.S. 316 (1997) (federal preemption does not displace basic state regulation of employment conditions)