Roman T. Galas and Heather L. Williams of Ansa Assuncao.

On Dec. 31, 2019, senior U.S. District Court Judge Roger T. Benitez of the Southern District of California, a 2003 George W. Bush appointee, made California truckers happy heading into the new year, granting an initial victory to plaintiff California Trucking Association (CTA) in its bid to block California's new Assembly Bill 5 (AB-5). Benitez granted a temporary restraining order (TRO) barring enforcement of AB-5 against "any motor carrier operating in California." The order's effect is indefinite, pending the court's resolution of CTA's motion for preliminary injunction. That motion will be heard Jan. 13.

AB-5, known as the "gig worker" law, was signed into law on Sept. 18, 2019, by California Gov. Gavin Newsom, who penned his support for the law in an op-ed touting a need to reverse what he called a "trend" of employer "misclassification" by re-classifying what could be tens of thousands of freelance workers and independent contractors as company employees. AB-5 was heavily criticized and met with a near-immediate flurry of lawsuits decrying the law as a "thinly veiled attempt" to target "gig" companies and workers, and a violation of various constitutional rights. Suits were filed by a group of freelance journalists hit by a series of layoffs (including 200 freelancers who had their contracts canceled by Vox Media), ride-hailing company Uber and courier-services company Postmates. The commercial trucking industry in particular—both large companies like Landstar and small independent truckers alike—feared the impact the law would have on trucking operations, with independent owner-operators (individuals who lease or purchase their own truck, then haul shipments for bigger companies for pay) advising they would no longer be able to operate in California with the law in place. That would be a significant loss: Independent owner-operators make up 9% of the truckers hauling freight on American roads. A typical owner-operator will log more than 2.5 million miles in their career.

With the bill set to take effect Jan. 1, CTA filed an amended complaint on Nov. 12, arguing that the realities of the trucking industry make it "impracticable, if not impossible for CTA's motor-carrier members to provide interstate trucking services by contracting with independent owner-operators and to simultaneously comply with California's onerous requirements for employees." In advance of a preliminary injunction hearing set for Jan. 13, CTA moved for a TRO on Christmas Eve, seeking to prevent enforcement of AB-5 "as to any motor carrier operating in California." Benitez granted the motion.

The bill, Benitez noted, presumes that an owner-operator is an employee of the motor carrier that hires them unless the motor carrier establishes each of three specific criteria:

• The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
• The person performs work that is outside the usual course of the hiring entity's business; and
• The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Expressly setting aside CTA's alternative challenges to AB-5's constitutionality (including an argument that it violated the dormant commerce clause), Benitez found that the Prong B requirement is likely preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA), which prohibits California (or any other state) from enforcing any law "having the force and effect of law related to price, route or service of any motor carrier" in the transportation of property. Citing California Trucking Association v. Su, 903 F.3d 953, 964 (9th Cir. 2018), where the U.S. Court of Appeals for the Ninth Circuit held that an "all or nothing rule" that required services to be performed by certain types of employee-drivers was likely preempted, Benitez found that AB-5 was likely preempted because it "effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are." Benitez found that CTA proved imminent, irreparable harm was likely "because without significantly transforming their operations to treat independent contracting drivers as employees for all specified purposes under California laws and regulations, they face the risk of governmental enforcement actions, as well as criminal and civil penalties."

Based on these findings, and after confirming CTA's standing to bring suit in the first place, Benitez granted CTA's requested TRO barring implementation and enforcement of AB-5 for all motor carriers operating in California pending resolution of CTA's motion for complete injunctive relief. CTA and its allies applauded the ruling with cautious optimism, with one fan describing it as "a wonderful New Year's gift." The CTA website links to a Tweet announcing the decision, with responses to the Tweet unanimously cheering the outcome. As of this writing, California's outspoken attorney general, Xavier Becerra, the named defendant in the lawsuit, has issued no comment on the ruling.

Other states, including New Jersey, New York, Colorado, Oregon and Washington, have implemented or are actively debating laws similar to (and equally as controversial as) AB-5. More than 25% of Americans rely on the gig economy for supplemental income; for 10%, it's their primary income. This is a hot topic, in an ever-evolving economy. We plan to track AB-5's progress through the California courts, the results of which will surely be informative to legislators, motor carriers and truckers and other gig workers in other states. Stay tuned.

Roman T. Galas is a partner with Ansa Assuncao in Philadelphia. He conducts a diverse, nationwide civil litigation practice, which includes defense of wrongful death, personal injury, property damage, and contract claims across the country.  

Heather L. Williams, an associate with the firm in the Columbia, Maryland office, is a civil litigator who handles matters in federal and state courts in Maryland and jurisdictions nationwide.