57 Cal.App.5th 619
Cal. Ct. App.2020Background
- Federal motor carriers operating drayage at the Ports of Los Angeles and Long Beach used independent owner-operators to move freight; Los Angeles City Attorney sued under the UCL alleging widespread misclassification.
- At suit filing, Borello (multi-factor test) governed classification; in 2018 Dynamex announced the ABC test for wage-order claims.
- AB 5 (2019) codified Dynamex (ABC test) statewide; AB 2257 (2020) revised AB 5 and added exemptions, including a business-to-business exemption and a Borello fallback when courts find ABC inapplicable.
- Defendants moved in limine arguing prong B of the ABC test (work outside hiring entity’s usual course of business) is preempted by the Federal Aviation Administration Authorization Act (FAAAA) because it effectively prohibits motor carriers from using independent contractors and thus affects prices/routes/services.
- The trial court agreed and certified its ruling for writ review. The People sought and were granted writ relief; this appellate decision vacates the trial court order.
- The court held AB 2257’s ABC test is a generally applicable worker-classification law and is not preempted by the FAAAA; it also found defendants failed to show the business-to-business exemption cannot apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAAAA preempts application of California’s ABC test to federally licensed motor carriers | ABC is a generally applicable classification rule that does not prohibit use of independent contractors, so it does not relate to carriers’ prices/routes/services | Prong B makes it impossible for motor carriers to treat owner-operators as independent contractors, thus affecting prices, routes, and services and triggering FAAAA preemption | The ABC test is not preempted by the FAAAA; Pac Anchor controls because the law is generally applicable and does not categorically bar independent contractors |
| Whether AB 2257’s business-to-business exemption and Borello fallback save the ABC scheme from preemption | The exemption allows bona fide business entities (e.g., trucking companies, properly structured owner-operators) to be governed by Borello, so carriers can lawfully use contractors | The exemption is unworkable for owner-operators (licensing, service-to-customer language), so it does not prevent the ABC test from effectively banning contractors | Court rejects defendants’ strained readings and finds defendants failed to prove the exemption cannot be satisfied; the exemption undermines defendants’ preemption claim |
Key Cases Cited
- Dynamex Operations W. v. Superior Court, 4 Cal.5th 903 (established California’s ABC test for wage-order claims)
- People ex rel. Harris v. Pac Anchor Transportation, Inc., 59 Cal.4th 772 (held FAAAA did not preempt a UCL misclassification claim; dispositive here)
- S.G. Borello & Sons v. Dept. of Industrial Relations, 48 Cal.3d 341 (articulated the traditional multi-factor employee/independent-contractor test)
- Dan’s City Used Cars, Inc. v. Pelkey, 569 U.S. 251 (explained the FAAAA’s "related to" preemption standard)
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (context on preemption and regulatory reach)
- Californians for Safe & Competitive Dump Truck Transp. v. Mendonca, 152 F.3d 1184 (Ninth Circuit discussion of legislative context relevant to preemption analysis)
- Schwann v. FedEx Ground Package Sys., 813 F.3d 429 (First Circuit decision holding prong B of a state ABC test preempted — a contrary authority discussed by the court)