Some 2,800 miles from Sacramento, where California lawmakers are fresh off enacting a bill that effectively blocks motor carriers from contracting with owner-operators, state lawmakers in Trenton, New Jersey, are considering nearly identical legislation.
Like California’s September-passed A.B. 5 law, New Jersey’s S. 4204 would restrict businesses’ ability to use independent contractors. It’s unclear what the ramifications of the New Jersey law ultimately would be, should it pass. But in California, the law has prompted fleets to shy away from using leased owner-operators — those who own their own truck but lease it to a larger carrier and operate under their authority. The law also has threatened the ability of independent owner-operators, those running under their own authority, to operate in California, says the California Trucking Association.
CTA, along with two independent owner-operators, filed a fresh lawsuit last month challenging California and its A.B. 5 law, and their attorney says he’s willing to see the lawsuit through all the way to the U.S. Supreme Court — especially in light of New Jersey’s push for a similar law the potential split court decisions that could arise in legal challenges against the two.
“I think it’s clearly setting up for a likely split,” says attorney Bob Roginson of the potential federal appellate circuit court decisions. Roginson, a partner at the firm Ogletree, Deakins, Nash, Smoak and Stewart, is representing the California Trucking Association and two independent owner-operators in their lawsuit against California’s A.B. 5. That lawsuit is currently at the Ninth Circuit Court of Appeals — a federal appellate court a step below the U.S. Supreme Court.
Roginson feels the Ninth Circuit will side with him and his plaintiffs in their case in California. He bases that on standing Ninth Circuit decisions, which have deemed the more nuanced “Borello” test as the proper test for determining whether a truck driver is a company employee or an independent contractor. Borello “was held by the 9th Circuit as to not be pre-empted so long as it’s fairly enforced. And that’s where we would like to get back to,” Roginson says.
The lawsuit directly targets the so-called ABC test — the core of A.B. 5. The law states that, for a worker to be classified as an independent contractor, they must meet three requirements (hence the “ABC test” name). CTA’s lawsuit seeks to have courts deem the ABC test invalid for determining whether a trucker should be classified as an independent contractor or an employee.
The crux of A.B. 5, for trucking, is that the B portion of the test prohibits employers from striking agreements with independent contractors in the same line of business as the employer, effectively invalidating trucking company lease agreements with owner-operator independent contractors. Carriers have begun cutting ties with owner-operators who live in California, in some cases offering to transition them to company driver or offering them the chance to move out of state and continue leasing on.
New Jersey’s S. 4204 intends to enact the same ABC test as the state’s go-to for determining worker classification across industries. If challenged via the courts, a subsequent lawsuit could make its way to the Third Circuit Court of Appeals.
Whether either circuit will side with or against the use of ABC tests in trucking is unclear, and decisions are likely years off. But if the rulings are split one for and one against, the issue would then be ripe for the nation’s high court, says Roginson. Split circuit court decisions “normally would mean the U.S. Supreme Court would weigh in and resolve any lingering disputes,” he says.
That may be best long-term, he says, to have the issue “confirmed and clarified” by the Supreme Court, one way or the other.
Obviously, a Supreme Court ruling in favor of the restrictive ABC test would be a disaster for the common leased owner-operator set-up, and potentially damaging for independents, too. On the flip side, a ruling by the Supreme Court against ABC test laws could be a major win for leased owner-operators and fleets that contract with them. In that case, the Supreme Court would make clear that any state-level laws requiring ABC tests to determine independent contractor status are not applicable to motor carriers and owner-operators they work with.