Federal District Court Rejects Trucking Companies’ Challenge to Assembly Bill 5’s Worker Misclassification Test

On March 15, 2024, the U.S. District Court of the Southern District of California issued a final decision in California Trucking Association v. Bonta, rejecting claims by the trucking industry that Assembly Bill 5’s (“AB 5”) “ABC” test for employment status is preempted by the Federal Aviation Administration Authorization Act (“FAAAA”), a federal statute that deregulated the trucking industry, or that it violates the Dormant Commerce Clause or Equal Protection Clause of the U.S. Constitution.  Under the “ABC” test, a worker is presumed to be an employee unless the employer can establish all three of the following requirements: (A) the worker 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; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business.

The same federal district court had issued a preliminary injunction against the application of AB 5 in the trucking industry before the law took effect, but that decision was overturned by the Ninth Circuit in 2021.  Since then, AB 5 has been in effect, and the district court’s decision makes clear that the State is permitted to use the “ABC” test, in its entirety, to combat misclassification in the trucking industry.  Evidence presented in the case showed that driver compensation in the trucking industry has fallen steadily for decades as misclassification practices became dominant, and many misclassified drivers end up earning less than the minimum wage (causing high turnover in the industry and safety concerns).

Altshuler Berzon LLP represents the International Brotherhood of Teamsters, which intervened in the case on the side of the State to defend AB 5.  The district court’s decision can be found here.