Ruling Expected on California’s Motion to Dismiss Dynamex-Related Case

November 29, 2018 by Cyndia Zwahlen

Trucking groups are pressing forward with efforts to thwart the California Supreme Court ruling that upended years of law used to decide if a worker is an employee or an independent contractor.

Independent contractors make up a large part of the transportation industry workforce, including thousands of truck driver owner-operators in California.

The April 30 ruling in the Dynamex class action lawsuit adopted an ABC test that basically assumes almost all workers are employees and eligible for the wide protections of California wage laws including overtime pay, meal breaks and minimum wage guarantees.

Part B of the test is key. It says a worker must perform work outside the usual course of business of the hiring company to qualify as an independent contractor. That seems to rule out owner-operator truck drivers because they typically do the same type of work as their client companies.

“The decision in Dynamex throws into question the legality of the entire trucking industry in California,” the Western States Trucking Association said in a lawsuit it filed earlier this year against the state of California over potential enforcement of the Dynamex ruling.

The group argued that the ruling violates federal law governing interstate transportation that pre-empts states from passing laws affecting the prices, routes and services of interstate motor carriers.

State Pushes Back

The state disagreed and filed a motion to dismiss the case.

Earlier this month, a federal judge in California heard arguments from both sides on the motion, including from a union that it allowed to intervene in the case on the state’s side.

Judge Morrison C. England Jr. of the Eastern District of California, which is part of the Ninth Federal Circuit, is expected to rule soon, according Joe Rajkovacz, the trucking trade group’s governmental affairs director, who attended the hearing.

The judge could deny the motion to dismiss, in which case the lawsuit could proceed. He could approve the motion but might allow the trade group to amend its original complaint. Or he might approve the motion to dismiss, and the trade group could file an appeal.

“This is just the opening round … It’s going to be an epic battle,” said Rajkovacz.

His organization is ready to take the fight to the U.S. Supreme Court, he said. The high court might agree to hear an argument when, as in this instance, a separate federal district court has issued a contrary ruling.

An attorney for the union said it was too early to consider a U.S. Supreme Court showdown. Previous decisions in the Ninth Circuit have determined that state laws were not pre-empted by federal regulations under similar situations, said Andrew Kushner.

“It’s just premature to think about that when we are still in District Court,” said Kushner, an attorney at Altshuler Berzon of San Francisco, which represents the International Brotherhood of Teamsters in the case.

“For the purposes of [the] hearing the court was supposed to apply 9th Circuit law; that’s what mattered, that’s all that was at issue at the hearing,” he said.

The California Supreme Court in its Dynamex ruling specifically said the ABC test must be used to determine if a worker is an employee or an independent contractor for purposes of filing a class action lawsuit over disputes under the state’s Wage Order 9, which applies to wage rules for transportation companies.

But trucking companies, and businesses outside the transportation industry, have worried that the test would be applied more broadly to any worker dispute, not just those that fall under wage orders. An example would be a dispute over who qualifies for workers compensation insurance coverage. And many businesses worried it also would become the de facto test for classifying workers, regardless of whether a legal dispute was involved.

Traditionally, businesses have used a multipart, more employer-friendly test known as the Borello test.

The Borello test grew from a 1989 California Supreme Court ruling. The decision in S.G. Borello & Sons Inc. v. Department of Industrial Relations outlined a test that includes what has become a key measure: whether an employer directs and controls the means and manner of how a worker does a job.

Reduced Pressure

A decision last month by a California appeals court took some pressure off the worried trucking industry.

In Garcia v. Border Transportation Group, the court said, “There is no reason to apply the ABC test categorically to every working relationship.” It said the Borello test still applied to non-wage disputes, such as wrongful-termination claims.

“Garcia has at least curbed some of the application of the ABC test to non-wage issues and workers compensation,” said Gregory M. Feary, transportation attorney and managing partner at Scopelitis, Garvin, Light, Hanson & Feary in its Indianapolis office.

Western States is not alone in pushing back against the Dynamex ruling.

Another trucking business group, the California Trucking Association, with which Feary’s firm works, in October filed its own lawsuit seeking to prevent California from applying and enforcing the ABC test. The California Trucking Association and two owner-operators argued that the Dynamex ruling “directly impacts the services, routes, and prices offered by CTA’s motor-carrier members to their customers” and is thus not allowed to be applied by the state to trucking companies under federal law.

Looking for a legislative fix.

The California Chamber of Commerce, whose members include trucking companies, also is working to limit the effect of the Dynamex ruling. It has organized rallies at the state capital supporting workers right to choose to operate as independent contractors. And it is leading efforts to get independent contractors to meet with their state representatives at scheduled meetings. It wants legislation to clarify or limit the scope of the Supreme Court’s Dynamex decision.

More questions than answers.

Some motor carriers are considering, or already making, changes to their operations after Dynamex, said industry experts. Turning over hiring to a brokerage firm is one example. Others are taking a wait-and-see approach to a complicated issue that is still unfolding. The Dynamex decision, for example, involved a courier company where workers drove light vehicles to deliver small packages. They often used their personal vehicles. Trucker owner-operators with specialty licenses moving interstate freight might be more easily deemed independent businesses under the A-B-C test.

Legal experts say there aren’t enough answers yet as to how the courts will interpret current claims by trucking groups and others in the light of past case law.

“When the question is being raised in a California court with the California Supreme court already weighing in on Dynamex, is it a heavy lift to have the next court in California not believe that the A-B-C test applies because of Dynamex?” said Feary. “The question is up for grabs right at the moment.”

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