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Handing Down Preliminary Injunction, Judge Says AB5 "Runs Off The Road'"

The temporary injunction stopping AB5 from being enforced against the trucking sector in California has been "promoted" to a preliminary injunction.

Benzinga · 01/17/2020 14:08

The temporary injunction stopping AB5 from being enforced against the trucking sector in California has been "promoted" to a preliminary injunction.

The move was largely expected after the outcome of a hearing Monday before Federal District Court Judge Roger Benitez in the case brought by the California Trucking Association (CTA) against California over the implementation of AB5. The law severely constricts the ability of companies to hire independent contractors in their predominant line of business. Benitez on New Year's Eve handed down a temporary injunction blocking implementation of AB5 in the trucking sector when it went into effect Jan. 1.  Benitez's statements from the bench Monday were generally interpreted as signaling that a move from a temporary injunction to a preliminary injunction was likely.

His decision Thursday touched on many of the same themes that were in his New Year's Eve decision, though in greater detail. The primary argument put forth by the CTA is that the Federal Aviation Administration Authorization Act of 1994 restricts how much a state can regulate transportation. "FAAAA preemption is broad but not so broad that the sky is the limit: states retain the ability to execute their police power with laws that do not significantly impact rates, routes, or services," the judge wrote. "Here, however, there is little question that the State of California has encroached on Congress' territory by eliminating motor carriers' choice to use independent contractor drivers, a choice at the very heart of interstate trucking."

The new law, the decision says, "produces the patchwork of state regulations Congress sought to prevent. With AB-5, California runs off the road and into the preemption ditch of the FAAAA."

Five days before the Monday hearing on whether to grant a preliminary injunction, California lost a case on some of the same arguments in a lawsuit it had brought against Cal Cartage, a drayage provider that is part of NFI Industries. Benitez's decision Thursday noted that the case in state court "ruled that because the ABC test effectively prohibits motor carriers from using independent contractors to provide transportation services, the test has a significant, impermissible effect on motor carriers' ‘prices, routes and services' and thus is preempted by the FAAAA." That case is cited in a long list of other cases that Benitez said argue in favor of the CTA view on whether the FAAAA preempts AB5 in the trucking sector.

The decision is unique to trucking and does not impact AB5 implementation in other sectors.

The ABC test at the heart of AB5 and its civil case that spurred the legislation, the so-called Dynamex decision, holds among other provisions that if a company hires a person to perform a task that is at the core of what that company does, that person should be considered an employee. That's the B prong of the ABC test. Putting aside the question of trucking, since it's at the heart of the CTA case, a company that provides translation services that hires an accounting firm to do its books passes the B prong; a translation company hiring an independent translator might not. (Translators have been particularly vocal that the implementation of AB5 is hurting them hard.) .

One of the tests of whether to grant a preliminary injunction is whether allowing the legal situation in question to go on unimpeded would inflict "irreparable harm" on the party seeking the injunction. "Plaintiffs have shown that irreparable harm is likely because without significantly transforming their business operations to treat independent-contractor drivers as employees for all specified purposes under California laws and regulations, they face the risk of government enforcement actions, as well as criminal and civil penalties," Benitez wrote.

The injunction is not the end of the case but will remain in place until final judgement is handed down. But lawyers who have followed the case have said Benitez's arguments in the proceedings so far, and in his orders, show a strong leaning toward the arguments of the CTA.

Image Sourced from Pixabay