A federal appeals court has ruled that federal law does not pre-empt New Jersey law in determining the employment status of a group of delivery drivers suing their employer, a logistics company.

In a precedential ruling Tuesday that allows the case to move forward, the U.S. Court of Appeals for the Third Circuit affirmed a New Jersey federal judge's denial of American Eagle Express' motion for judgment on the pleadings.

AEX contended that the drivers' claims that they were misclassified as independent contractors were pre-empted by the Federal Aviation Authorization Administration Act of 1994.

The drivers, New Jersey residents, filed the putative class action seeking a judgment from the court that they were employees, not contractors, under the New Jersey Wage and Hour Law and the New Jersey Wage Payment Law.

Third Circuit Judge Patty Shwartz. Photo by Carmen Natale

Third Circuit Judge Patty Shwartz wrote in the court's opinion that in order for the applicable New Jersey law to be pre-empted in the case, it must have a significant impact on a motor carrier's ability to conduct business.

The question then focused on New Jersey's statutory “ABC classification test” for determining the employment status of workers.

“The New Jersey ABC classification test does not have a significant effect on prices, routes, or services either. The test does not bind AEX to a particular method of providing services,” Shwartz said, joined by Circuit Judges Joseph Greenaway Jr. and Stephanos Bibas in affirming the ruling below from U.S. District Judge Esther Salas of the District of New Jersey.

Shwartz added, “No part of the New Jersey test categorically prevents carriers from using independent contractors. As a result, the state law at issue here does not mandate a particular course of action—e.g., requiring carriers to use employees rather than independent contractors—and it offers carriers various options to comply with New Jersey employment law.”

AEX argued unsuccessfully that the law would force it to shift from its practice of using independent contractors, which it said would drive up costs and lead to price increases.

“Specifically, AEX asserts that if it can no longer use independent contractors to perform its delivery services, then it will be forced to recruit employees, bring on a human resources department to manage them, acquire and maintain a fleet of vehicles and pay expense reimbursements, provide fringe benefits, plan and dictate delivery routes and timing, and pay overtime wages and employment taxes,” Shwartz said. “Our Court and our sister circuits have rejected similar lists of conclusory impacts. Though AEX correctly states that it need not proffer empirical evidence to support its assertions of significant impact at the pleading stage, it does not provide even a logical connection between the application of New Jersey's ABC classification test and the list of new costs it would purportedly incur.”

Harold Lichten of Lichten & Liss-Riordan in Boston represented the plaintiffs and did not respond to a request for comment.

Joseph C. DeBlasio of Jackson Lewis in Morristown represents AEX and also did not respond to a request for comment.