Updates on AB5 and Prop 22 Legal Battles in California

The passage of Prop. 22 saved Uber, Lyft, and other gig workers from AB5, spending more than $200 million to write their own labor law… which trucking failed to do. Both laws have been in the courts ever since.

The AB5 law, which the trucking industry has been fighting for years now, makes it more difficult for companies to classify people who work for them as independent contractors with the new ABC test.

In March, trucking received a setback. California’s AB5, that covers an estimated 70,000 owner-operators, lost another chance to block the rule.

Meanwhile, California Supreme Court is reviewing Proposition 22 that exempt companies like Uber and Lyft from AB5’s strict limits on who can be classified as an independent contractor.

If Prop 2022 is reversed, then big money will once again push for the repeal of AB5 or a new exemption process that trucking might ride along this time.

Is any of this likely? Let’s find out.

What did the California judge decide on AB5 and trucking?

AB5 has not been overturned. It is still the law and continues to wreak havoc across a vast swath of professions in California, including trucking.

Truckers were allowed to be independent contractors for almost 2 ½ years after the passage of AB5. The trucking industry had a preliminary injunction which was dissolved and the Ninth Circuit’s ruling against California Trucking Association’s lawsuit prevailed. AB5 is now officially in effect for the trucking industry.

On June 30, 2023 the U.S. Supreme Court denied review of an appellate court decision that had opened the door to trucking falling under AB5.

According to the judge, the original preliminary injunction, “was entered based upon the preliminary conclusion that AB5 was preempted by the Federal Aviation Administration Authorization Act.”

The state of California, along with the International Brotherhood of Teamsters, appealed the ruling, and the Court of Appeals reversed the injunction, finding that AB5 was not preempted by the F4A. CTA and OOIDA then filed renewed motions for a preliminary injunction.

In the renewed claims, CTA and OOIDA re-alleged that:

1. F4A preempted AB5,
2. There is implied preemption of AB5,
3. AB5 is a violation of the Dormant Commerce Clause of the U.S. Constitution, and
4. AB5 violates the Equal Protection Clause of the Constitution “by creating irrational or animus-based classifications.

The judge said California’s law doesn’t make it “impossible for truck drivers to comply with both federal and state law because there is simply no federal standard of classification requiring compliance and concluded that “if sufficient political or economic pressure can be brought to bear by Plaintiffs and their supporters, the more onerous provisions of the statute can be amended. The courts, on the other hand, are not the proper bodies for imposing legislative amendments.”

The California Trucking Association and other supporters are continuing the legal battle.

UPDATE: Does AB5 violate the Equal Protection Clause?

In a separate case, Lydia Olson and Miguel Perez – drivers for Uber and Postmates – filed a lawsuit in 2019, arguing that AB5 violates the Equal Protection Clause.

On June 10, 2024, the Ninth Circuit ruled unanimously in favor of the state.

“AB5 does not directly classify any particular workers as employees or independent contractors,” Judge Jacqueline Nguyen wrote in the court’s opinion. “Rather, under AB5, as amended, arrangements between workers and referral agencies that provide delivery or transportation services are automatically subject to the ABC Test adopted by the California Supreme Court.”

“Under the deferential rational basis standard, the en banc (full panel) court concluded that there were plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies, particularly where the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address – worker classification,” Nguyen wrote.

Hope for Supreme Court appeal of Prop 22

AB5 broadly redefined an employee as a worker who performs duties that are central to a company’s business. Gig companies lobbied hard against the bill and responded to its passage with Prop. 22, which was approved in November 2020 after businesses like Uber and Lyft poured more than $200 million, a record-setting amount, into the campaign and threatened to cut services in the state.

The following year, workers supported by the Service Employees International Union sued the state twice — once in the Supreme Court and once in Alameda Superior Court — on grounds that the proposition unconstitutionally prevented the state from overseeing the workers’ compensation system.

Although the appellate court determined that Prop. 22 did not violate the Legislature’s power over workers’ compensation, Justice Jon B. Streeter disagreed and gave the measure’s opponents some hope going into their Supreme Court appeal.

The California Supreme Court’s decision to hear the case could potentially add years to the already drawn-out battle over gig worker classification and will hear oral arguments next Tuesday in a case that could change the fate of more than 1 million gig workers in the state.

If Prop. 22 is overturned, they say gig companies will reduce the number of gig workers on their platforms.

CNS can help fleets with our new driver hire program

If AB5 does not include a trucking exemption, then there will be a flood of independent carriers going through a new hire process. There are a lot of rules around the hiring process, not limited to drug testing, CDL Clearinghouse queries, compliant DQ file process, and more.

To get these drivers on the road fast, Compliance Navigation Specialists has developed a new hire program that will streamline your hiring process.

Our New Hire service includes the following:

• Tailor Drive Qualification file (paper) or Online Tailored Driver Qualification File (Paperless)
• Initial Audit
• Previous employer inquires completed on your behalf
• Initial Motor Vehicle Report (MVR)
• Pre-Screening program report (PSP)
• Online Record Retention
• Pre-employment drug screening verification
• Doctor on medical card verification
• FMCSA clearinghouse full query
• Driver Qualification
• New Hire phone support
• and more

Accuracy, organization and diligence are crucial to keeping your files in order and ready for an audit at a moment’s notice. Our DQF Management System is completely customizable to your individual needs. The consultants at CNS stay in communication with you regarding document updating, as well as offering comprehensive reports upon request, and reports of routine audits by our own DQF Auditors.

Our driver management and new hire management services will exceed your expectations. You focus on trucking, and let us focus on your driver file management. If you have a fleet of drivers, we assure you that you can’t do this cheaper in-house.

Eliminate the administration cost and have Compliance Navigation Specialists manage your files.

We will ensure that your information is collected, current, and complete. In addition, we will continue to update your files as required, and let you know when an updated piece of information is needed.