California’s Trucking Law Could Increase Exposure to Nuclear Verdicts™

Author: Cynthia Speegle

Guest Editor: Grace Shuman

Related Articles: Nuclear Verdicts, Employment, California, Trucking

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January 28, 2022 9:00am

 

The United States Supreme Court refused to hear the case brought by Cal Cartage Transportation Express LLC challenging the appellate court ruling upholding California’s Assembly Bill 5 (“AB5”).  Though AB5’s impact on rideshare companies is often dissected, the law also significantly impacts the trucking industry, and can, without careful planning, expose trucking companies to Nuclear Verdicts™.

 

  1. Cal Cartage Transportation Express LLC v. California, US Supreme Court, No. 0-1453

The Supreme Court case was based on a prior complaint from the city of Los Angeles, which claimed Cal Cartage and other trucking companies were unlawfully misclassifying truck drivers as independent contractors.[i]  Cal Cartage countered this and argued AB5 was preempted by the Federal Aviation Administration Authorization Act (FAAAA).[ii]  The California Court of Appeals, Second District in Los Angeles stated AB5 does not mandate trucking companies use employees and that it is within the power of the state to regulate employment relationship with generally applicable laws.[iii]

Cal Cartage argued the law was preempted by the FAAAA because of the law’s effects on the company’s operations, which would impact the prices and services it offered.[iv]  The US Supreme Court denied Cal Cartage’s petition for certiorari on October 4, 2021.  However, similar challenges are being brought before the Court, such as the California Trucking Association’s challenge to a 9th Circuit ruling applying AB5 to truck drivers.[v]

 

  1. AB5 – The Gig Workers Bill

AB5, also known as “the gig workers bill,” went into effect January 1, 2020 and reclassifies many independent contractors as employees.[vi]  In effect, it codifies the 3-part test laid out in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal. 5th 903.[vii]

The Dynamex court stated:

The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions: (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (b) that the worker performs work that is outside the usual course of the hiring entity’s business; and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.[viii]

If an employer fails to establish all three of these conditions, the worker is considered an employee and not an independent contractor.  In an industry like the trucking industry, which relies heavily on the hiring of independent contractors who own their own trucks, this can open companies up to increased liability exposure.

 

III. Increased Liability Exposure Increases Exposure to Nuclear Verdicts™

It is not uncommon in the trucking industry for a company to hire an independent contractor driver who then hires an additional driver to form a “team.”  In these situations, the Privette Doctrine often insulates the trucking company from liability to employees of the independent contractor for on-the-job injuries.[ix]  In Privette v. Sup. Ct., the court observed that an independent contractor’s liability to its employees for on the job injuries is limited by the workers’ compensation system, which provides compensation to injured employees regardless of employer fault.[x]  In exchange, the independent contractor employer receives civil immunity, which in turn limits the hirer’s ability to obtain indemnity from the independent contractor employer.[xi]  Allowing the contractor’s employee to bring a civil action against the hirer would produce the anomalous result that the nonnegligent hirer’s liability could exceed that of the negligent employer.[xii]  For this reason, courts have concluded the protections afforded to employers should also be extended to hirers of independent contractors.[xiii]

AB5’s potential declassification of truck drivers as independent contractors could leave trucking companies exposed to potential liability for on-the-job injuries sustained by the employees of their truck drivers.  In turn, this increased liability exposure could increase the potential of Nuclear Verdicts™ coming their way.

 

  1. Conclusion

Trucking companies could hire drivers, including driving teams, as employees and benefit from the Worker’s Compensation Act.  However, classifying all drivers as employees could increase labor costs, increase costs to consumers, and reduce flexibility for truck drivers.  AB5’s impact on the future of the trucking industry is still uncertain.  In the meantime, it would serve trucking companies well to work with legal counsel to structure their independent contractor and employee agreements.

 

 

 


 

[i] Daniel Wiessner, No SCOTUS review of California law’s impact on trucking industry, Thomson Reuters, (Oct. 4, 2021), https://today.westlaw.com/Document/I0c2c0ed0255311ec86c3db30f5ade17c/View/FullText.html?ppcid=i0ad640340000017c501cd1e68553a3ce&originationContext=Search+Result&transitionType=AlertsLegalNewsDaily&contextData=(sc.Default)&alertGuid=i0ad71595000001736e1b426f4c876f8b&alertGuid=i0ad71595000001736e1b426f4c876f8b&skipAnonymous=true&firstPage=true&bhcp=1.

[ii] Id.

[iii] Id.

[iv] Id.

[v] California Trucking Association, Inc. v. Bonta, SCOTUSBlog, (n.d.), https://www.scotusblog.com/case-files/cases/california-trucking-association-inc-v-bonta/.

[vi] AB-5 Worker status: employees and independent contractors, California Legislative Information, (Sept. 18, 2019), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB5.

[vii] Id.

[viii] Dynamex Operations W. v. Superior Court (2018) 4 Cal 5th 903, 955-956.

[ix] Privette v. Sup.Ct. (Contreras) (1993) 5 Cal.4th 689, 700-702

[x] Privette v. Sup.Ct. (Contreras) (1993) 5 Cal.4th 689, 700-702

[xi] Privette v. Sup.Ct. (Contreras) (1993) 5 Cal.4th 689, 700-702

[xii] Privette v. Sup.Ct. (Contreras) (1993) 5 Cal.4th 689, 700-702

[xiii] Privette v. Sup.Ct. (Contreras) (1993) 5 Cal.4th 689, 700-702

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