Two court rulings this month in California delivered good labor news to motor carriers fighting a running battle in the state over rest break rules.
But a recent decision that affects the practice by trucking companies of classifying drivers as independent contractors rather than employees was a reversal.
The two rest break rulings backed the Department of Transportation’s declaration that its December decision to end California’s laws mandating paid rest and meal breaks for drivers is retroactive.
But labor won its own victory when a separate court decision this month said the so-called Dynamex ABC test used to determine a worker’s status also is retroactive. The test looks at the work an individual performs on the job and rules whether they should be considered an employee or independent contractor.
The shifting labor landscape is creating uncertainty for truck drivers and those who hire them.
The decisions are expected to face more challenges.
“It’s a long way from over,” said Joe Rajkovacz, a spokesman for Western States Trucking Association, based in Upland, Calif.
The industry is watching a proposed California bill that would make state law the so-called Dynamex ABC test used to determine a worker’s employee status. Trucking companies and others are working to blunt the potential impact of the bill and are seeking to exempt truck drivers.
The bill would limit the practice of motor carriers operating in California to classify drivers as independent contractors.
Trucking industry labor interests won a victory a year ago when the California Supreme Court handed down its landmark decision in Dynamex Operations West Inc. v. Superior Court.
The Court adopted an ABC test that generally 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 the problem for the industry. It says a worker has to be performing 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 test was to be used to determine if a worker was an employee or an independent contractor in labor disputes involving state Wage Order No. 9. That order, which applies to transportation companies, covers four areas: minimum wage, overtime pay, meal and rest breaks, and accurate wage statements.
Previously, trucking companies and other businesses relied on a more flexible, multipart test laid out in the 1989 decision in S.G. Borello & Sons Inc. v. Dept. of Industrial Relations.
The Western States Trucking Association has argued that federal motor carrier safety laws preempt the Dynamex decision from applying to trucking companies altogether. In March, the U.S. Supreme Court rejected a WSTA appeal of a decision by the 9th Circuit Court in California that said federal rules did not pre-empt Dynamex.
The California Trucking Association has also filed suit claiming Dynamex is pre-empted by federal law.
The trucking industry has a large share of truck drivers classified as independent contractors. The rate of drivers misclassified as independent contractors instead of as employees is also high, according to a 2000 study by the U.S. Labor Department recently cited by the UC Berkeley Labor Center.
Earlier this month, a California court ruled for the second time that the strict ABC test to determine whether a worker is an employee or an independent contract applies retroactively – to before the April 30, 2018, decision was handed down.
The opinion was issued May 2 in Vasquez v. Jan-Pro Franchising Int’l Inc. The Dynamex decision happened while an appeal in the Vasquez case was pending.
Last summer in another case — Johnson v. Imperial Showgirls — a judge in the Orange County Superior Court ruled Dynamex applied retroactively to the dispute.
The retroactive application is not a surprise to transportation attorneys. The state supreme court refused to address the issue a month after its initial decision. And traditionally, rulings like this are retroactive.
AB-71 last month failed to meet a legislative deadline and is dead for the year.
The other bill is on its second round of amendments in the committee process. The bill would carve out exceptions to the ABC test for certain professions, including doctors and direct sellers. But business groups, including the California Chamber of Commerce, want much broader exceptions. That includes truck drivers as well as gig economy workers.
Failure to add exemptions could eliminate the majority of independent contractors in California, said Laura Curtis, a policy advocate at the California Chamber of Commerce, in an April letter. That letter, sent to the legislative committee considering the bill, was signed by several dozen state business groups.
“This not only hurts the business model of a broad swath of industries and billions of venture capital dollars that are increasingly invested in businesses, but also it hinders California as a national leader in the innovation economy,” she wrote.
The ruling on the ABC test in Dynamex stands for now.
“That is being sifted out through appeals so I think it’s fair to say that there is uncertainty on the whole application of the ABC test in the state,” said Gregory M. Feary, a transportation attorney at Scopelitis, Garvin, Light, Hanson & Feary in Indianapolis.
CALIFORNIA MEAL AND REST BREAK RULES
The trucking industry is applauding two May court rulings that did say some federal rules preempt state regulations.
In response to a petition by the American Trucking Associations, the Department of Transportation said in December that the less restrictive federal hours of service rules pre-empted California rest and meal break regulations for truckers. But at the time, the DOT didn’t say whether its decision was retroactive.
Both the rulings upheld that the DOT’s pre-emption decision issued by its Federal Motor Carrier Safety Administration in December is retroactive.
“In the last few days, the courts have recognized that the FMCSA decision essentially eliminates their jurisdiction and that in fact the federal law does apply,” Feary said.
His firm worked with the defendant company in one of the cases.
The rulings were likely helped along by the federal agency in March posting its own legal opinion that the pre-emption of California meal and rest break rules was retroactive. The agency’s hour of service rule applies to interstate truck drivers running heavy rigs — trucks of 10,000 pounds or more.
The hours-of-service rule is intended to reduce driver fatigue that could lead to crashes. It limits driving to no more than 11 hours a day within a 14-hour workday. Drivers must then be off duty for 10 consecutive hours.
Garda CL West Inc.: The first came May 9 in two wage and hour disputes involving the Garda armored truck company. The state trial court judge ruled that the two plaintiffs who fell under federal hours-of-service rules were covered by the December pre-emption decision, even though their claims were filed beforehand.
“It is this Court’s view that it has no choice but to respect and enforce the FMCSA Administrator’s preemption Determination without trying to second-guess its legal or policy correctness,” wrote the judge in denying the plaintiffs request for a summary judgement.
The FMCSA pre-emption decision is being challenged in the U.S. 9th Circuit Court of Appeals. Judges have said they will reconsider their decisions if the appeals succeed.
U.S. Xpress Enterprises Inc.: Earlier this month, the Central District Court of California threw out part of a class action lawsuit by hundreds of truck driver plaintiffs that claimed U.S. Xpress had broken California meal and rest break rules.
The May 2 decision in Ayala v. U.S. Xpress Enterprises Inc. et al. said the December decision by the FMCSA applied to them, despite the fact that several groups are appealing it.
“The court currently has no authority to enforce the regulations under which the Plaintiff brings his first cause of action,” wrote U.S. District Judge George H. Wu. “Therefore, the issue of retroactive effect is irrelevant.”