Ninth Circuit Denies California Trucking Association’s Attempt to Use Federal Preemption to Avoid Enforcement of State Labor Law

by Michelle R. Ferber and Julie Ann Giammona

Last month, the Ninth Circuit concluded that the California Labor Commissioner’s use of the common-law Borello standard to determine employment classification was not preempted by the Federal Aviation Administration Authorization Act (“FAAAA”). In California Trucking Association v. Su, the court determined that the Labor Commissioner could apply California common law to truck drivers who claimed they were misclassified as independent contractors.

The case was brought by owner-operators who entered into contracts with the trucking companies to use their own trucks and pay for their own expenses when transporting materials for a trucking company. The owner-operators claimed they were misclassified as independent contractors instead of employees.  The California Trucking Association (“CTA”) argued that the FAAAA preempted state regulation of intrastate motor carriage, thus preventing the Labor Commissioner from applying the Borello common law standard to determine employment status. The Ninth Circuit rejected this argument noting that “The mere fact that a motor carrier must take into account a state regulation when planning services is not sufficient to require FAAAA preemption, so long as the law does not have an impermissible effect, such as binding motor carriers to specific services, making the continued provision of a particular service essential to compliance with the law, or interfering at the point that a carrier provides services to its customers.” Because the Labor Commissioner’s use of the Borello standard did not have a serious impact on a motor carrier’s prices, routes or services, preemption was not required.

Setting aside the impact of the preemption analysis of CTA v. Su, the case is significant on another level: The Ninth Circuit did not apply the new Dynamex ABC test to determine employment classification. In addition to the fact that neither party asked to submit briefs on the impact of the Dynamex decision (the CTA case had been filed before the Supreme Court announced its decision in Dynamex) the Ninth Circuit noted: “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.” The holding of Dynamex was specifically limited to cases alleging violations of California wage orders; CTA v. Su sought injunctive relief to prevent the Labor Commissioner from applying the Borello standard – different contexts, different results.

Given the above, and the fact that at least one trial court has applied the Dynamex decision to claims arising under the Labor Code, it is no wonder that California employers may feel uncertain while attempting to sort out what appears to be a myriad of uncertain and conflicting holdings. Ferber Law has the experience and knowledge to guide employers through the maze. We look forward to reviewing employment classification issues with you so your business can avoid unnecessary liability exposure.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.