Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Federal and State Judges Rule California Cannot Enforce AB5!

by gspencermynko

Breaking News: Federal Judge Roger Benitez has gone a step further and GRANTED the CTA’s motion for an injunction that now blocks AB-5 enforcement against California trucking companies until the entry of Final Judgment. Furthermore, a State Judge also ruled that AB-5 is preempted by Federal law.

California Trucking companies got an extended reprieve from AB-5 and the ABC test, now that a Federal Judge granted a preliminary injunction restraining the state of California from enforcing AB-5 until the lawsuit is resolved. Note: The CTA may ultimately prevail in this landmark case and AB5 will be little more than a footnote in the annals of California Trucking history. U.S. District Judge Roger Benitez, who issued a temporary restraining order preventing state officials from enforcing the law against motor carriers, has now extended that ruling by granting a preliminary injunction. While not officially dead, AB5 (as far as trucking companies and their owner-operators are concerned) is the in the ICU on life support.

Let’s revel in Judge Benitez’s decision and its rationale.

Here are some noteworthy excerpts that make it clear the Judge “gets it”.

“For decades, the trucking industry has used an owner-operator model to provide the transportation of property in interstate commerce. That model generally involves a licensed motor carrier contracting with an independent contractor driver to transport the carrier-customer’s property…Motor carriers offer many types of trucking services, including conventional trucking, the transport of hazardous materials, refrigerated transportation, flatbed conveyance, intermodal container transport, long-haul shipping, movement of oversized loads, and more. Motor carriers meet the fluctuating demand for highly varied services by relying upon independent-contractor drivers”

Unlike California Democrats, Judge Benitez actually took the time to understand the industry:

“Individual owner-operators use a business model common in both California and across the country. They typically buy or lease their own trucks, a significant personal investment considering that the record reflects a single truck can cost in excess of $100,000… Then, the owner-operators typically work for themselves for some time to build up their experience and reputation in the industry. Once the owner-operator is ready to expand their business, they contract for or bid on jobs that require more than one truck, at which time, the owner-operator will subcontract with one or more other owner-operators to complete the job. Many individual owner-operators have invested in specialized equipment and have obtained the skills to operate that equipment efficiently”

He then nicely summarized the Borello test that has been relied on for decades:

“Whether certain laws and regulations in the California Labor Code apply to truck drivers, generally, depends on their status as employees or independent contractors. S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal. 3d 341, 350 (1989). For nearly three decades, California courts have used a test, based on the Borello decision, to determine whether workers are correctly classified as employees or independent contractors. The Borello standard considers the “right to control work,” as well as many other factors, including (a) whether the worker is engaged in a distinct occupation or business, (b) the amount of supervision required, (c) the skill required, (d) whether the worker supplies the tools required, (e) the length of time for which services are to be performed, (f) the method of payment, (g) whether the work is part of the regular business of the principal, and (h) whether the parties believe they are creating an employer-employee relationship”

Here’s some good stuff that bodes well for CA trucking’s future:

Likelihood of Success on the Merits: “.To prevail on their motion for a preliminary injunction, [CTA] must establish, at a minimum, that there are “serious questions” on the merits of at least one of their challenges to AB-5’s ABC test… For the following reasons, Plaintiffs have done so with their FAAAA preemption challenge… the FAAAA likely preempts “an all or nothing” state law like AB-5 that categorically prevents motor carriers from exercising their freedom to choose between using independent contractors or employees.

AB-5 goes against Congress’ intent to deregulate the industry:

“By effectively prohibiting motor carriers from contracting with independent contractor drivers, AB-5 and its ABC test would transform California into its own patch in the very “patchwork” of state-specific laws Congress intended to prevent.”

These Words should be music to your ears:

“[T]here is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking. In so doing, California disregards Congress’ intent to deregulate interstate trucking, instead adopting a law that produces the patchwork of state regulations Congress sought to prevent. With AB-5, California runs off the road and into the preemption ditch of the FAAAA. Accordingly, Plaintiffs’ motion for a preliminary injunction is GRANTED.

A State Court Judge Also Agrees That AB-5 is Preempted by Federal Law.

On January 8, 2020, Judge William Highberger of the Los Angeles Superior Court ruled that because the ABC test effectively prohibits motor carriers from using independent contractors to provide transportation services, the test has a significant, impermissible effect on motor carriers’ “prices, routes, and services,” and thus, is preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The People of the State of California v. Cal Cartage Transportation Express, LLC, Case No. BC689320 (Los Angeles Superior Court January 8, 2020). The court reached the same conclusion (as Judge Benitez in the CTA case), finding the FAAAA preempts AB 5 as applied to owner-operators contracting with motor carriers. The ruling makes it clear that AB-5’s ABC test is preempted by the FAAAA, and restores the multi-factor Borello test as the standard to determine whether a truck driver is an independent contractor or employee. The Court ruled that the FAAAA preempted Prong B of AB-5’s ABC test because it effectively prohibits motor carriers from utilizing independent owner-operator truck drivers.

Judge Highberger stated that the “‘ABC Test’ set forth in Dynamex Operations-West v. Superior Court and the recently enacted AB-5 clearly run afoul of Congress’s 1994 determination in the FAAAA that a uniform rule endorsing use of non-employee independent contractors (commonly known in the trucking industry as ‘owner-operators’) should apply in all 50 states to increase competition and reduce the cost of trucking services.” The judge went on to state: “After careful consideration, the court agrees with defendants that the currently operative legal requirements for determination of employee versus independent contractor status are preempted as to certain motor carriers and their drivers by an act of Congress”.

Wow – Trucking is winning in the State courts as well.

Yet Another Sweet Order Better Than The Last One.

I really love this (and I’m sure you do too):

“It is further ORDERED:… Defendant Xavier Becerra, in his official capacity as the Attorney General of the State of California, Julia A. Su, in her official capacity as the Secretary of the California Labor and Workforce Development Agency, Andre Schoorl, in his official capacity as the Acting Director of the Department of Industrial Relations of the State of California, Lilia Garcia Brower, in her official capacity as the Labor Commissioner of the State of California, and Patrick Henning, in his official capacity as Director of the California Employment Development Department are temporarily enjoined from enforcing Assembly Bill 5’s ABC test, as set out in Cal. Labor Code § 2750.3(a)(1), as to any motor carrier operating in California, pending the entry of final judgment in this action”.

Trucking Industry – 3, State of California – 0. Thanks Judges.

Will Trucking Win The War?

While I really cannot understate the huge significance of winning this battle, the war rages on. And while the State and the Teamsters have been seriously injured, they – and their bastard child AB-5 – are not dead yet. Stock up on popcorn folks – this is going to get interesting.

YOUR EXECUTION HAS BEEN STAYED!

by gspencermynko

Breaking News: A federal judge granted trucking companies an injunction that temporarily blocks AB-5 enforcement against California trucking companies.

Trucking companies got a temporary reprieve from AB-5 and the horrible ABC test when a Federal Judge granted an injunction restraining the big, bad state of California and its minions and lackeys from enforcing AB-5. In the final hours of New Year’s Eve (the day before AB-5 went into effect), your new hero, U.S. District Judge Roger Benitez issued a temporary restraining order preventing state officials from enforcing the law against motor carriers. The CTA brought a motion asking for injunction – which are not commonly granted – and the judge agreed with the CTA’s position. Can I get a “Hallelujah” and “Amen” from my brothers and sisters?

How did the CTA win this huge battle?

The CTA argued that Federal Law – specifically the FAAAA – preempted state law (i.e. AB-5) regarding the use of independent contractors. In its motion, the CTA said this:

“Given the realities of trucking, it would be impracticable if not
impossible for CTA’s motor-carrier members to provide interstate trucking services by contracting with independent owner-operators and to simultaneously comply with California’s onerous requirements for employees. The direct and real consequence of Dynamex and AB-5, therefore, is that CTA’s motor-carrier members, if they wish to avoid significant civil and criminal penalties, must cease contracting with owner-operators to perform trucking services for customers in California and to shift to using employee drivers only when operating within the State.”

The CTA went on to state:

“For decades, the trucking industry has heavily relied on the owneroperator
model-which involves the use by licensed motor carriers of independent
contractors who own and operate their own trucks-to provide the transportation of property in interstate commerce. A motor carrier’s ability to contract with independent contractors is necessary because the demand for, duration of, and volume of trucking services provided by individual motor carriers fluctuates significantly.”

The thrust of the CTA’s legal argument was summed up here:

“The ABC test and AB-5 “is expressly preempted by the FAAAA because the requirement that motor carriers treat all drivers as employees and the concomitant de facto prohibition on motor carriers contracting with independent owner-operators to perform trucking services in California directly impacts the services, routes, and prices offered by CTA’s motor-carrier members to their customers.”

Furthermore:

The FAAAA says “.[A] State… may not enact or enforce a law, regulation, or
other provision having the force and effect of law related to a price, route, or service of any motor carrier.” See 49 U.S.C. § 14501(c)(1)

The CTA went on in great detail in a 29 page motion, which is beyond the scope of this article, but notably concluded:

The ABC test, as construed in Dynamex and codified by AB-5, therefore, undermines the economic viability of independent owner-operators….The intent and impact of the Dynamex decision and now AB-5 is clear-motor carriers can no longer contract with independent owner-operators and must shift to using an employee-only business model.”

The Judge Agreed With The CTA

Judge Benitez discussed the CTA’s contention that AB5 was preempted by a 1994 federal statute that prohibits states from making laws that affect the price, route or service of freight-hauling motor carriers. Here are the highlights and excerpts of his decision and his reasoning:

“On December 24, 2019, [CTA] filed a motion for temporary restraining order, seeking to enjoin [California] from enforcing Assembly Bill 5 (“AB-5”) as to any motor carrier operating in California…Having considered the parties’ arguments set forth in [CTA]’s supporting papers, as well as the [State’s] opposition papers, the Court finds that (the) requested temporary restraining order is warranted.

“The Court finds that a temporary restraining order is warranted. At this early stage of the proceedings and within the brief amount of time available, [the CTA has] carried their burden for purposes of emergency relief to show (1) that they are likely to succeed on the merits, (2) likely to suffer irreparable harm in the absence of relief, (3) that the balance of equities tips in their favor, and (4) that their requested relief is in the public interest. See Winter v. Natural Resource Defense Council, 555 U.S. 7, 20 (2008).

“Specifically, [CTA has] shown that AB-5’s Prong B is likely preempted by the FAAAA because AB-5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are. In other words, because contrary to Prong B, drivers perform work within “the usual course of the [motor carrier] hiring entity’s business,” drivers will never be considered independent contractors under California law. “

“[The CTA has] established that imminent, irreparable harm is likely because without significantly transforming their operations to treat independent contracting drivers as employees for all specified purposes under California laws and regulations, they face the risk of governmental enforcement actions, as well as criminal and civil penalties.”

Amen.

Why this is such a big deal and a major victory.

Even though this is merely a Preliminary Injunction, and the court could change its mind, here’s why the court will likely stick with its initial ruling. In his ruling, Benitez said the CTA “are likely to succeed on the merits.” This means that based on the limited arguments and evidence before him, the Judge decided that if the case goes to a full-blown trial, the CTA will likely win. That is an extremely strong statement coming from a Federal District Judge who tend to be highly regarded. Furthermore, it is very difficult to get a restraining order and injunction against a State from enforcing an enacted law. This is huge and it speaks volumes as to the strength of the CTA’s position. I was skeptical of the prospects of the CTA’s success in seeking an injunction, knowing how hard they are to win and how hesitant judges are to rule before a full and fair trial on the merits. Prior to this ruling, I was frequently asked about the CTA’s lawsuit, and I voiced my lack of optimism. Yet the judge saw through the absurdity of what the state Democrats – in their unbridled arrogance – tried to shove down the throats of trucking companies and their owner-operators. That said, my optimism on the future of the Owner-Operator business model has increased exponentially.

Here Is The Best Part of Judge Benitez’s Ruling.

I love this:

“It is further ORDERED: 1. Defendant Xavier Becerra, in his official capacity as the Attorney General of the State of California, Julia A. Su, in her official capacity as the Secretary of the California Labor and Workforce Development Agency, Andre Schoorl, in his official capacity as the Acting Director of the Department of Industrial Relations of the State of California, Lilia Garcia Brower, in her official capacity as the Labor Commissioner of the State of California, and Patrick Henning, in his official capacity as Director of the California Employment Development Department are temporarily enjoined from enforcing Assembly Bill 5 (“AB-5″) as to any motor carrier operating in California, pending this Court’s resolution of Plaintiffs’ motion for a preliminary injunction.”

It’s not everyday that someone succeeds in telling the the State of California to Fuck Off – the CTA did just that. #FUCADems, #FUTeamsterWhores, and best of all, #FULG.

Call To Discuss The Implications Of This Victory

While I cannot understate the significance of winning this battle, the war is far from over and the enemies of trucking companies and owner-operators will regroup, reload and marshal their forces in their efforts to preserve AB-5

New California Employment Laws For 2020

by gspencermynko

Now That All Of Your ICs will be Employees 1/1/20…

This article is particularly important, because it affects basically everyone: every trucking company who utilizes employee drivers will find this helpful. Also, every trucking company who utilizes independent contractors will find this helpful because come January 1, the ICs will all become employees too. So, in light of the fact that the use of independent contractors will be a crime punishable by execution come January 1, it behooves you to become familiar with these laws.

AB5: Expansion of the independent contractor ABC test

I’m taking time to mention this for those of you who have been living under a rock or spent the last six months in drug and alcohol rehab. Yes, AB5 makes the “ABC Test” the law of the land for essentially all practical purposes. Again, a truck driver may only be classified as an independent contractor if the hiring entity can show that the worker meets all of the following criteria (which, of course, is impossible):

A. The worker is free from the control and direction of the hiring entity, both under the contract for the performance of work and in fact;

B. The worker performs work that is outside of the usual course of the hiring entity’s business, and;

C. The worker is engaged in independently established trade, occupation, or business that is of the same nature as the work performed for the hiring entity.

Because the ABC test will now apply to the entire California Labor Code and California Unemployment Insurance Code, and no exemptions exist for Trucking, a trucking company classifying a truck driver as an independent contractor is essentially illegal without any exceptions.

Permitting employees to recover civil penalties for unpaid wages (A.B. 673)

I found this interesting and surprising that come January 1, 2020, California law will enable employees to recover civil penalties for unpaid wages, which used to be available only by an order from the Labor Commissioner. In a civil lawsuit, employees will now be able to recover $100 for each initial violation for failure to pay each employee, and $200 for each subsequent violation, and any willful or intentional violation, +25% of unpaid wages. These penalties will be recoverable either in a lawsuit or in a PAGA claim, but not under both for the same violation.

Obviously, you want to make sure all employees are paid all of their wages always on time.

Expanding the labor commissioners authority to pursue wage claims (SB 688).

Effective January 1, 2020, this new law expands the enforcement abilities of the Labor Commissioner. Currently, the Labor Commissioner can only issue citations for violations alleging unpaid minimum wages. This new law expands on that and will allow the Labor Commissioner to penalize violations of unpaid wages that are less than the contractually agreed upon wages, in excess of minimum-wage. In other words, if you pay your employees less than you promised to pay them, regardless of their agreed-upon wage, The Labor Commissioner will hammer you.

Minimum wage and minimum salary increases.

Effective January 1, 2020, California state minimum-wage will increase to $12 per hour for employers of 25 or fewer employees, and to $13 per hour for employers of 26 or more employees.

Also, the minimum salary permitted in California will automatically increase to $49,920 annually for employers of 25 or fewer employees and $54,080 annually for employers of 26 or more employees. This is based on the calculation of the minimum wage times 2080 hours.

However, be aware that some cities have local ordinances that increase the minimum wage beyond the state minimum wage. However, these local ordinances do not affect the state minimum salary requirement.

Obviously, make sure your employees are making at least minimum wage under state and local laws, unless they are exempt and therefore paid at least the applicable minimum salary under California law.

Harassment, discrimination, and retaliation.

Effective January 1, 2020, AB9 extends the deadline for an employee alleging unlawful discrimination, harassment, or retaliation in violation of the California Fair Employment and Housing Act (FEHA). Effective January 1, 2020, AB9 extends the deadline for an employee alleging unlawful discrimination, harassment, or retaliation in violation of the California fair employment and housing act (FEHA) to file a verified complaint with the California Department of Fair Employment and Housing (DFEH) from one year to three years.

Another important reason trucking companies need to keep good records in the event something like this comes back to haunt them years later.

Sexual harassment prevention training deadline (SB778).

This law extends the deadline for employers with five or more employees to provide two hours of sexual harassment prevention training to supervisors, and one hour of sexual harassment prevention training to employees from January 1, 2020, to January 1, 2021. Currently, the law requires employers of 50 or more employees to provide two hours of training to supervisors.

Obviously, make sure your supervisors and employees undergo the requisite training by January 1, 2021.

Arbitration Agreements and Separation/Settlement Agreements

Banning Mandatory Arbitration Agreements (AB 51): Effective January 1, 2020, this law prohibits California employers from requiring employees and applicants to sign arbitration agreements as a condition of employment, continued employment, or the receipt of any employment related benefit. It also states that employers may not retaliate against an employee who refuses to sign an arbitration agreement.
However, The United States Supreme Court has made it very clear that state laws prohibiting arbitration are preempted by the Federal Arbitration Act (FAA).

Unfortunately, the United States Supreme Court ruled earlier this year that the FAA does not apply to “any class of workers engaged in foreign or interstate commerce”, which obviously includes interstate truck drivers. This creates a huge problem for trucking companies relying on arbitration agreements, because even if we specify that the enforceability of the arbitration agreement is governed by federal law, the US Supreme Court has already excluded truck drivers operating in interstate commerce from mandatory arbitration.

For those companies relying on arbitration agreements, you now must get with your attorneys to discuss the use of arbitration agreements and whether they are even worthwhile having anymore.

Penalties for failing to pay arbitration costs (SB 707)

Effective January 1, 2020, employer who fails to pay the costs and fees for arbitration within 30 days of the deadline will default on the arbitration agreement and waive its right to compel arbitration. In such an event, the employee will be permitted to dismiss a claim from arbitration and proceed in Superior Court.

Also, the employer may be required to pay the employees attorneys’ fees and costs regarding the arbitration, and the statute of limitations will be extended back to when the arbitration was filed.

Finally, this bill also allows the court to sanction employers who breach an arbitration agreement. Assuming you can still require employees to arbitrate a claim, Make sure arbitration fees are paid on time!

“No rehire” provisions in employee settlements are void (AB 749)

I frequently draft employment settlement agreements for trucking companies. Under this new law, a settlement agreement may not prohibit or restrict an employee from obtaining employment with the employer or a related company. However, there is an important exception to this: “no rehire” provisions may still be included in severance or settlement agreements entered into in response to a demand letter or unfiled claim. However, do not interpret this as being required to rehire the employee at sometime in the future.

Lactation accommodation requirements (SB142)

Effective January 1, 2020, employers will be required to provide more lactation accommodations than previously required. Specifically, A lactation room must:

Be close to the employee’s work area;
Be shielded from view and free from intrusion; and
Have certain features, including electricity and resources necessary to operate a breast pump.
The room cannot be a bathroom.

Employers must create and implement a lactation accommodation policy and make it available to employees. The policy must include the following:

A statement about an employee’s right to request lactation accommodation;
The process by which the employee makes the request;
The employer’s obligation to respond to the request; and
A statement about an employee’s right to file a complaint with the Labor Commissioner for any violation.

Also, employers must include this policy in the employee handbook and make those policies available to employees. furthermore, they must distribute the policy to new employees upon hiring and whenever an employee makes an inquiry about or request parental leave.

Notably, failure to provide adequate lactation accommodation will be considered a violation of California rest break laws, requiring an employer to pay one hour of pay per day for each day on which a violation occurs.

Trucking companies with less than 50 employees may request an exemption if the requirements create “significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employers business”.

Remember, employers who do not currently have a lactation policy must now implement one, and your current lactation policy must be updated You may contact Transportation Attorneys to assist with drafting a compliant employee handbook and policies manual.

Expansion of paid family leave (SB 83)

Effective July 1, 2020, the maximum duration of paid family leave benefits an individual can receive from California state disability insurance program will increase from 6 to 8 weeks.

Reporting work injuries and illnesses (A.B. 1804)

Effective January 1, 2020, AB 1804 will require employers to report serious workplace injuries, illnesses, or death immediately by telephone or through an online platform to the California division of occupational safety and health (a.k.a. Cal OSHA).

Saving the best for last: Prohibiting discrimination based on protected hairstyles (SB 188)

Effective January 1, 2020, this law expands the definition of race under FEHA to prohibit racial discrimination and harassment based on a person’s natural hairstyle. Therefore, your dress codes and grooming policies cannot prohibit “natural hair, afros, braids, twists, and locks” – the Democrats decided that such people require an extra level of protection.

So, trucking companies should review their dress and grooming standards to ensure that none of the “protected hairstyles” are prohibited or discouraged. Too bad we couldn’t all just follow “Spencer’s law” on this, which so states: “I don’t give a shit what you do with your hair as long as I don’t have to wear it.”

Dynamex “ABC Test” Applies Retroactively – Or Maybe Not

by gspencermynko

California Appeals Court Rules Dynamex is Retroactive

As is already well known, The trucking world was turned upside down April 30, 2018 when the California Supreme Court handed down Dynamex Operations West, Inc. v. Superior Court. 4 Cal.5th 903 (2018) and gave California the gift of the “ABC Test”.

Unless you can borrow Doc Brown’s Delorean or the Star Trek transporter, you’ve got problems.

OK, I’ll concede that time travel doesn’t exist, but that hasn’t stopped some courts from going back in time and stating the law that was the law then is no longer the case, and that even though you were acting legally at the time, we have now decided that you were acting illegally and are now in trouble. I’ll expand on this more in a minute, but that is the gist of retroactively applying the “ABC Test” to conduct that was governed by the Borello Multi-factor test at the time the conduct occurred.

A Quick Refresher on the ABC Test.

In an astonishing move that took most people in the industry and their legal counsel by surprise, in 2018 the CA Supreme Court shit canned a long-standing multi factor test which had been applied to determine if a worker was an employee or an independent contractor. As most of my readers know, the California Supreme Court threw out the Borello factor test and declared the “ABC Test” as the new determinant of who is independent and who is an employee. An unsettled question was whether the ABC test applies retroactively, and would conduct which took place prior to the Dynamex decision still be determined by the old Borello standard.

On October 8, 2019, the California court of appeals handed down a ruling in Gonzales v. San Gabriel Transit, Inc. and stated that the ABC test is to be applied retroactively to pending litigation. So, if you are being sued for alleged wage and hour claims for conduct that occurred before the ABC test became law, you will no longer be able to claim that you were simply following the law. You are right if you think this is incredibly unfair. For years, I would advise clients on whether they were compliant with the law in their use of independent contractors based on my analysis using the Borello multi factor test. Now, the court comes along and says that that doesn’t matter, that really was never the law anyways, and you are now guilty of misconduct for conduct that was legal at the time. Yeah, how’s that for a kick in the nuts?

Now, to be fair to the court, the court made it clear that the ABC test applies to labor code claims which are “rooted in one or more wage orders, or predicated on conduct alleged in one or more wage orders.” As far as other labor code claims are concerned, the court stated that the Borello multi-factor test still applies.

As most of you know, under the “ABC test,” independent contractors are considered employees unless an employer established the following three factors:

A. That the worker is free from the control and direction of the hiring entity 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 the work performed.

And as most of you know, its the B prong that screws over trucking companies using Owner-Operators. Dynamex, however, did not address whether the ABC Test would apply retroactively to older claims or prospectively. That is why the Gonzales case could have far reaching impact.

The Implications Of the Gonzales Case.

Because of the Gonzales decision, trucking companies who relied on the Borello standard for classification of their independent contractors prior to the dynamics decision may have some liability exposure.

But hold your horses.

In another case at the United States Court of Appeals for the Ninth Circuit, Vasquez v. Jan-Pro Franchising International, Inc. initially ruled that the Dynamex ABC test applies retroactively. In Jan-Pro, the Ninth Circuit held that even though the California Supreme Court decided Dynamex after the trial court granted Jan-Pro’s motion for summary judgment, the Dynamex standard must be applied retroactively. However, the ninth circuit withdrew that decision and punted the matter of the retroactivity of Dynamex to the California supreme court for a formal opinion. As of the writing of this article, that issue is still pending, and if the California Supreme Court rules otherwise, the Gonzales decision may be short lived and overturned soon. But until it is, it is clear that California courts are leaning toward the retroactive application of Dynamex and the ABC Test.

However, The recently passed AB5 contains retroactive language, and states that the ABC test should be applied retroactively.

Are you still here?

When people come to my office wanting advice on how to start a trucking company in California, my first instinct is to Google “Psychiatrists” and politely, but firmly, tell them they are crazy. Despite this advice being adverse to my own interests, I regularly advise trucking companies to do what they do anywhere but California – and maybe Massachusetts as well which is a special cauldron of hell where Satan himself actually concocted the ABC Test. If you can do what you do outside of California, you can leave this bullshit behind.

While the politicians – and in California, what I really mean is the Democrat powerhouse – want you to think that AB5 was necessary to protect the poor, powerless and abused truck driver, the reality is that by eliminating independent contractors, the state can collect more taxes, and the unions can collect more dues, and the trial attorneys can squeeze you for huge legal fees. The ultimate irony is that the owner operators who went out, secured financing for their own rig, purchased a rig with the hope of using that investment to make money, are completely screwed and deprived of true entrepreneurial opportunity. Now, they are forced to be an employee in California and have to be asking themselves “Why in the hell did I buy this truck and trailer if I’m simply going to be another company driver?” Good question, and the answer is that the collection of taxes, union dues, and plaintiffs’ lawyer legal fees are simply much more important.

Most bonafide owner operators that I’ve come in contact with are happy with the status quo, and enjoy the freedom of being independent, being able to make more money than a company driver, and having more choices regarding their work. But the politicians would have you believe that all independent contractors are abused individuals who get stuck into some impossible lease purchase scheme, where the evil Trucking Co. takes advantage of them until they can’t any further and then throws their dying body to the side of the road, and then turns around to put another sucker in the truck. But this is nothing more than the tired script used by the politicians and their lackeys ,the unions and plaintiffs’ bar, to crush an entire business model that put food on the table and kept the lights on in houses across the state. AB5 has nothing to do with protecting the true, bonafide owner operator, but has everything to do with the Democrats protecting their interests and the interests of their biggest supporters, the unions and trial lawyers. Quite frankly, I hope Uber and Lyft are successful in their proposed 2020 referendum to overturn AB5. That should stop the pathological salivating and drooling of the welfare alchemists who fabricated the abomination known as AB5.

My Bitching Is Fun, But Not Really Helpful.

Venting provides relief, if only temporary, but AB5 is just over 2 months from becoming reality. Trust me, the State and Plaintiff’s lawyers are going rain down hell upon trucking companies that use ICs come January 1. And remember – because of how the Labor Code is written in California – Owners, Directors and Officers of trucking companies can be held personally liable for Labor Code violations – that’s right – and after they take everything you have, you will be left for dead on the side of the road. But take heart – then you’ll be eligible for MediCal benefits.

Requiem For The Independent Trucker

by gspencermynko

California democrats have effectively killed off the Independent Contractor business model in trucking. Come January 1, 2020, if you hire a bona-fide owner operator truck driver to haul a load under your authority, the state of California and plaintiff’s lawyers will be allowed to destroy your business, sue you back to the Stone Age, and, as an owner, director, or officer of a trucking company, take everything you own. Yeah, it’s that shitty.

California Democrats decide to take a bad idea and make it worse.

As I’m sure all of you know, in 2018 The California Supreme Court decided on their own to completely change independent contractor law by adopting the “ABC Test” to determine whether someone is an independent contractor. Apparently, they were so enamored with how the state of Massachusetts determines who is an independent contractor, they shit-canned decades of common law jurisprudence culminating in the “Borello” test, and committed some of the worst legislating from the bench in American history when they handed down the decision in Dynamex Operations v. Superior Court (2018) 4 Cal. 5th 903, and made the ABC test the law of the land.

The Democrat politicians in California went into unbridled orgiastic ecstasy and clearly felt that Dynamex wasn’t simply another court case, but something holy like The 10 Commandments God gave to Moses on top of Mount Sinai.

Unlike Moses, who probably had some humility and decided it wouldn’t be a good idea to fuck with God by changing the 10 Commandments, The Democrat politicians were undaunted and obviously believed they could improve on the divine edict as handed down in Dynamex and make it better than their Higher Power originally intended.

The Democrats have (another) orgy.

While the ABC test, as handed down by the Creator and relayed to humankind through His vessel The California Supreme Court, was a good start in the minds of the Democrats, they decided to broaden its reach after getting together and taking a bunch of ecstasy at a rave. Well, to be honest, I’m not sure the Democrats we’re high on ecstasy (or maybe LSD) when they created AB5 and proclaimed it “God’s law”, but until someone can give me a better explanation for their behavior, I am going to continue to float that theory.

Regardless of the status of their neurotransmitters and intoxicated brains, AB5 has been entered into the sacred text of California law in the book of Gavin. And while the Democrat politicians seem to be in a state of perpetual inebriation, owners and officers of trucking companies are headed for a shit storm that can only be described as the buzz-kill of the century. A word of advice to trucking company owners using ICs: don’t drink on New Year’s Eve, because do you really want to be hung over while attempting to come to grips with the fact that AB5 is now the law of the land? And if you plan on celebrating in Vegas, you may want to simply stay there and open a marijuana dispensary.

Let’s add a few more Commandments.

When the ABC test was handed down by God…. er, I mean the California Supreme Court…. it was limited to wage orders which, for practical purposes, limited the application of the test to such things as minimum wage, meal and rest breaks, and keeping accurate wage statements and time records, etc.
Despite the consecrated genius of its original form, the high priests of the Democrat Party expanded the ABC test to apply to the entire labor code and the entire unemployment insurance code. So regardless of what state agency is coming after you or what State sanctioned temple you are being held in to account for your sins, get prepared for some old testament justice meted out by Labor Board commissioners, tax auditors, plaintiff’s attorneys, and whoever else has been given the green-light to cut off your head.

So what do I do to keep myself out of the crucible of the Democrat Overlords?

Well, before I conclude that you’re fucked – which you are – allow me to elaborate on your shitty options which basically fall into two major categories: convert your independent contractors into employees by 1/1/20 (good luck with that); or continue to treat them as independent contractors (good luck with that).

The employee route:

OK, this is simple: convert all of your 1099 owner operators into employees for all purposes. Withhold taxes. Provide benefits. In addition to withholding, and on-boarding them as employees, be sure to comply with all of the requirements of the California labor code. So be sure to track all of the hours they work, pay at least minimum wage, make sure meal and rest breaks are provided, along with sick leave and family leave. Reimburse them for all expenses. Be sure to put up a California compliant poster in the break room. Make sure your wage statements are compliant and your time keeping records are meticulous.

Oh – yeah – one other little detail: get a work comp policy. I’m sure State Fund will be happy to sell you one at 25 to 30% of your payroll.

Then, after you have done all of that, you can bask in the gratitude and appreciation of your former independent contractors, who will be universally sympathetic to your plight and understanding in that you are simply trying to abide by the law.

But wait, isn’t there some exemption we can take advantage of?

Well, you are probably thinking of the “Business to Business” exception. Here, let me quote it verbatim:

1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (‘business service provider’) contracts to provide services to another such business (‘contracting business’), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

a) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

b) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

c) The contract with the business service provider is in writing.

d) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

e) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

f) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

g) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

h) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

i) The business service provider provides its own tools, vehicles, and equipment to perform the services.

j) The business service provider can negotiate its own rates.

k) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

l) The business service provider is not performing the type of work for which a license from the Contractors State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

I have this picture in my mind of the California Democrats who created this abomination sitting at the edge of a minefield, drinking lemonade and eating petit fours, while watching trucking company owners try to navigate the minefield that is the “Business to Business Exception”. Of course, they sit back and laugh while watching the trucking company owners and executives get blown to smithereens and smugly deride them for being so stupid as to classify anybody as an independent contractor.

Shades of Gray.

While the picture I paint is sort of black and black, there are about 10 or 11 options trucking companies can consider as they confront this horrible new reality. You may consider it worth your while to sit down with me and discuss these options, however, I will be blunt: they all suck.

So, I prepare to bid farewell to the independent contractor/owner operator truck driver: it’s been nice knowing you. I hope one day you arise from the ashes.

Contact Transportationattorneys.net today for all of your Transportation matters.

FMCSA HOS Changes + Will ICs Survive Friday the 13th?

by gspencermynko

In this article I’m writing about two substantially important potential developments in Trucking and Transportation. Neither of these matters have been finalized yet, however, because of their great importance and future implications, all trucking companies need to keep these matters on their radar because they could profoundly affect their businesses. And finally, I want to comment on a potential escape hatch should doomsday arrive this Friday.

The FMCSA May change hours of service much-maligned rules that have been in place since 1937

I might as well start off this article with some good news: The FMCSA has proposed five changes to the hours – of – service rules. Back in the days before Big Brother and his ELD gizmo decided to catch a ride with every long-haul trucker in America, outlaw truckers utilized numerous creative ways flout HOS rules. As we all know, those days came to a crashing halt with ELD’s.
However, The ELD mandate resulted in numerous criticisms and real-world problems faced by the people in the driver’s seat. The bulk of these complaints related to safety and flexibility, such as being forced to park in unsafe places and recklessly trying to beat the clock. Apparently, the FMCSA has listened and has laid out a new proposal.

“This proposed rule seeks to enhance safety by giving America’s commercial drivers more flexibility while maintaining the safety limits on driving time,” said U.S. Transportation Secretary Elaine L. Chao.

“Based on the detailed public comments, FMCSA’s proposed rule on hours of service offers five key revisions to the existing HOS rules:

The Agency proposes to increase safety and flexibility for the 30 minute break rule by tying the break requirement to eight hours of driving time without an interruption for at least 30 minutes, and allowing the break to be satisfied by a driver using on duty, not driving status, rather than off duty.

The Agency proposes to modify the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of not less than two consecutive hours, either off duty or in the sleeper berth. Neither period would count against the driver’s 14-hour driving window.

The Agency proposes to allow one off-duty break of at least 30 minutes, but not more than three hours, that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.

The Agency proposes to modify the adverse driving conditions exception by extending by two hours the maximum window during which driving is permitted.

The Agency proposes a change to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on-duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.”
The new rules “would not increase driving time and would continue to prevent CMV operators from driving for more than eight consecutive hours without at least a 30-minute change in duty status.”

See https://www.fmcsa.dot.gov/newsroom/federal-motor-carrier-safety-administration-publishes-hours-service-proposal-improve-safety.

People wishing to submit comments before the window soon closes can look here: https://www.federalregister.gov/documents/2019/08/22/2019-17810/hours-of-service-of-drivers.

The day of reckoning is upon us: Will the Dynamex ABC test become law this week and turn Owner-Operators and the trucking companies who use them into criminals?

After The California Supreme Court radically changed the definition of an independent contractor in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, trucking companies were thrown into a state of turmoil, but our politicians were thrown into a state of ecstasy. Indeed, California democrat politicians felt the court’s decision was the greatest thing since sliced bread. As such, they quickly went to work to “codify” the extremely restrictive ABC test. Notably, The court’s decision only applied to Industrial Welfare Commission Wage Orders, and excluded claims brought under the Labor Code or Unemployment Insurance Code. Undaunted, California politicians felt they could make a “good” idea even “better” by making sure AB 5 will apply in any circumstance and criminalize the behavior of the majority of trucking companies and truck drivers in California.

While doctors, dentists, lawyers and other professionals were able to secure an exception to the “ABC Test” in AB 5, The trucking industry has not been successful in securing an exception. And it looks like they won’t. AB 5 cleared a committee last Friday in the state Senate and it is expected to pass both houses of the legislature before lawmakers adjourn Friday, September 13. Furthermore, governor Newsom has promised to sign the bill into law.

Unfortunately, this will likely drive owner-operators and the businesses who rely on them out of business or force them to operate illegally until they get caught.

“The light at the end of the tunnel is just the light of an oncoming train.” Robert Lowell.

On that pessimistic note, I urge my readers to take what I am about to say next with reluctant optimism. Is there language in AB 5 that owner-operators, and the trucking companies who rely on them, can exploit to exempt O-Os from the ABC test? Specifically, there is language in AB5 which states the holding in Dynamex will not apply to bona-fide business-to-business contracting relationships between sole proprietors, partnerships, LLCs, and corporations. In such cases, the old Borello or “common law” test will determine whether someone is an employee or independent contractor. However, this will only apply if certain criteria are satisfied, which include:

(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

(C) The contract with the business service provider is in writing.

(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

(I) The business service provider provides its own tools, vehicles, and equipment to perform the services.

(J) The business service provider can negotiate its own rates.

(K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

(L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.

Uhhh, OK – that’s about as clear as mud and will ensure years of costly litigation fighting over this. My opinion is that until the Feds or the US Supreme Court step in and preempt California law, the days of legal ICs in trucking will effectively come to an end this week. Stay in touch with Transportation Attorneys for future guidance.

Another Court Preempts California Wage and Hour Law and Limits the ABC Test

by gspencermynko

This article is going to seem strikingly similar to my previous article, however, trucking companies have scored some more significant victories in the federal courts of California. In one case, yet another court handed a win to a trucking company on meal and rest breaks and limited the application of the ABC test at the same time. There also is some news on the retroactive application of the ABC test, and the United States department of labor weighs in on when sleeper berth time is compensable, and hands down an opinion in favor of trucking companies.

Another California Court Rules California Meal and Rest Break Law is Preempted by Federal Law and Limits the Application of the ABC Test

See Henry v. Central Freight Lines, Inc., No. 2:16-cv-00280-JAM-EFB (June 13, 2019). In this particular case, A driver by the name of Rickey Henry entered into an Independent Contractor Operating Agreement with Central Freight Lines, Inc. As with most interstate carriers, Central Freight Lines is authorized by the USDOT and received their motor carrier authority from the federal government. As is so typical and today’s litigious environment, when Mr. Henry became disenchanted with his employer, CFL, he sued them claiming he was misclassified as an independent contractor and that CFL violated California meal and rest break laws.
In a ruling that is astonishingly similar to the case I wrote about 2 weeks ago (Ayala v. US Xpress), The court dismissed Henry’s claims alleging violations of California’s meal and rest breaks under California Labor Code section is 226.7 and 512. And again, the court noted that in 2018, the FMCSA published an order “concluding that California’s meal and rest break rules are preempted as applied to property-carrying commercial motor vehicle drivers covered by the FMCSA’s hours of service regulations.” The court essentially ruled that it would not enforce California’s meal and rest break laws, because they are preempted by federal law. This marks two recent and significant transportation cases where courts have ruled that California meal and rest break laws do not apply to Federally licensed motor carriers.

The court stated it was required to follow and enforce the FMCSA decision: specifically, California meal and rest break rules cannot be enforced against motor carriers and their drivers who are operating in the state. The courts are respecting the FMCSA’s position and following its declaration that motor carriers subject to USDOT rules do not have to follow California Meal and Rest Break rules.

Furthermore, in what can be described as a slap in the face to the state of California and plaintiffs’ lawyers, The court ruled that the ridiculous ABC test will only apply to claims brought under California Wage Orders (and not the entire California Labor Code). The court specifically held that the previous Borello “Right of Control” test, also known as the “common law” test for determining if a driver is an independent contractor, would be used to determine most of Henry’s claims. In what can only be described as a huge victory for the trucking company, the court held that the Borello test would also be used to determine any claims brought under California’s private attorney general act (PAGA).

Obviously, this is yet another important case where the courts are prohibiting the application of California meal and rest breaks against trucking companies, and limiting the application of the absurdly strict ABC test.

The Ninth Circuit US Court Of Appeals Withdraws Their Opinion That Dynamex ABC Test Should Be Applied Retroactively and Punts to the California Supreme Court.

The question of whether the Dynamex ruling can be applied retroactively is being kicked backed to the California Supreme Court, where the Dynamex decision was first handed down. The Ninth Circuit held that Dynamex applied retroactively to an 11-year class action lawsuit brought against a nationwide janitorial cleaning business by franchisees who claimed they were misclassified as independent contractors. The Dynamex decision adopted the strict “ABC test” for determining whether workers are independent contractors or employees for claims brought under the state’s wage orders. After ruling that Dynamex could be implemented retroactively, The U.S. Ninth Circuit Court of Appeals withdrew that opinion and returned the question of whether Dynamex could be applied retroactively to the state Supreme Court. See Vazquez v. Jan-Pro Franchising International, which also dealt with misclassification of employees as independent contractors.

The California Supreme Court has up to 90 days to decide whether to take the case. We shall see – Unfortunately, despite decades of the relying on the Borello standard to determine if a worker is an Independent Contractor, many courts have been unsympathetic to trucking companies who acted in compliance with this test on the advice of their lawyers and changed the rules of the game with absolutely no warning and applied those rules to all prior games played.

U.S. Department of Labor (DOL) issued a July 22, 2019 opinion letter stating sleeper berth time is non-compnesable.

The US  Department of Labor has issued an opinion letter on compensating truck drivers for time spent in sleeper berths while off-duty.  The DOL stated that drivers need not be compensated for any time in which “drivers are relieved of all duties and permitted to sleep in a sleeper berth…. [as this is] presumptively non-working time that is not compensable.”  The rule that nonworking time in which the driver is relieved of all duties is not compensable is true  whether or not the truck is moving or stationary. See the full opinion letter here: DOL Opinion Letter.

California Meal and Rest Break Suit Dismissed on Basis of FMCSA Preemption Stance.

by gspencermynko

On Friday, May 3, 2019, the Central District of California dismissed the meal and rest break claims in a class action based on the December 28, 2018 decision from the FMCSA preempting the California meal and rest break rules as they apply to interstate drivers.

See Ayala v. U.S. Xpress Enterprises, Inc. et al., Case No. EDCV 16-137-GW(KKx). A federal court dismissed a lawsuit brought by a group of drivers against U.S. Xpress concerning the state’s meal and rest break laws, signaling a potential tide change in the lingering legal issue in the state. The court determined that it lacks jurisdiction to rule on a class-action suit brought against U.S. Xpress that alleges the motor carrier violated State of California rules governing meal and rest breaks for commercial vehicle drivers. The court also stated it was required to follow and enforce the FMCSA decision: specifically, California meal and rest break rules cannot be enforced against motor carriers and their drivers who are operating in the state. This decision because it reflects how the courts are respecting the FMCSA’s position and following its declaration that motor carriers subject to USDOT rules do not have to follow California Meal and Rest Break rules.

A quick refresher on the Law:

California requires an employer to provide employees who works more than five hours with a 30-minute uninterrupted, off-duty meal break (and another meal break if they work more than 10 hours). State law also requires an employer to provide employees with a 10-minute uninterrupted, off-duty break every four hours.Cal. Lab. Code §§ 226.7, 512. Regulations issued by the U.S. Department of Transportation (DOT), on the other hand, require only that a commercial driver not drive more than eight hours without first taking a 30-minute, off-duty meal break. See 49 C.F.R. § 395.3(a)(3).

California’s labor code provides for a 30-minute meal break for shifts of five hours or more for all workers in the state. California laws also establish a right for workers in the transportation industry to a 10-minute break for every four working hours. In contrast, Federal hours-of-service rules impose daily limits on driving time, and require long-haul truck drivers to take at least 30 minutes off no less than eight hours after starting a shift if they plan to drive for more than eight hours in a day.

On December 21, 2018 The FMCSA ruled that All Truck Drivers Subject to USDOT Rules Do Not Have To Follow California Law Regarding MRB.

The U.S. Transportation Department ruled last December that California laws requiring truck drivers be allowed certain break periods can be pre-empted by federal laws, which provide for less downtime. The ruling comes in response to a September petition of the DOT by the American Trucking Association (ATA), which claimed that a when rules vary from state to state, it can cause confusion for drivers and challenges for business across the supply chain.

The DOT’s Federal Motor Carrier Safety Administration wrote California’s meal-and-rest break laws, “are more stringent than the agency’s hours of service regulations, that they have no safety benefits that extend beyond those already provided by the Federal Motor Carrier Safety Regulations, that they are incompatible with the Federal hours of service regulations, and that they cause an unreasonable burden on interstate commerce.” The FMCSA has determined that the MRB Rules are laws on CMV safety, that they are more stringent than the Agency’s hours of service regulations, that they have no safety benefits that extend beyond those already provided by the Federal Motor Carrier Safety Regulations, that they are incompatible with the Federal hours of service regulations, and that they cause an unreasonable burden on interstate commerce. The California MRB Rules, therefore, are preempted under 49 U.S.C. 31141(c).

The FMCSA Opinion has now been tested in the courts, and the Trucking Companies are the victors.

The U.S. Central District of California (9th Cir.) entered an order dismissing the meal and rest break claims of the plaintiff and absent class in Ayala v. U.S. Xpress Enterprises, Inc. et al., based on the decision by the FMCSA to preempt the state’s meal and rest break rules as they apply to drivers operating in interstate commerce. The case is the first since the FMCSA decision to test the new legal environment surrounding California’s meal and rest breaks as they pertain to trucking.There have been four different appeals filed with the 9th Circuit challenging the FMCSA’s decision. The district court explicitly conditioned the dismissal on the plaintiff’s right to seek reconsideration should the 9th Circuit reverse or possible stay the FMCSA’s decision on the appeal. The lawyers representing US Xpress stated “This is an important precedent for transportation companies facing meal and rest break claims in California. It provides a means to stop the litigation, including discovery on those claims, while the appeal is pending.

However, take heart that the court’s reasoning is on solid ground.
The Ayala court acknowledged the authority of the Secretary of Transportation to make a determination that state laws meeting certain criteria are preempted and, unless the Ninth Circuit rules otherwise, California may not enforce its meal and rest period rules with respect to drivers of property-carrying commercial motor vehicles subject to FMCSA’s hours of service rules.

Take this good news with caution.

Based on the appeals to the decision in Ayala v. U.S. Xpress Enterprises, Inc. The Ninth Circuit (or U.S. Supreme Court) will have to decide whether the FMCSA’s preemption Order stands. Until the Ninth Circuit rules, motor carriers operating in California have to choose between compliance with California’s meal and rest break rules or hope the Ninth Circuit upholds the FMCSA’s decision. If a carrier changes its policies and practices in reliance on the FMCSA decision, but the Ninth Circuit later overturns the FMCSA decision, the carrier could be liable for violating California meal and rest break law. Trucking companies may want to wait for the Ninth Circuit’s decision before disposing of their California-compliant meal and rest break policies and practices for drivers working in California.

Now we need to convince the FMCSA that the Dynamex “ABC Test” is preempted by Federal Law. Let’s hope that is a future article.

Legal Developments On Sleeper Berth Claims, Dynamex Legislative Developments, and Non-Compete Agreements.

by gspencermynko

 

Judge says drivers should be paid for sleeper berth time

Trucking companies who utilize sleeper berth equipment for their drivers, will be interested in two recent legal cases. The Fair Labor Standards Act requires employers to pay a minimum wage to employees for all “hours worked.” Two federal district courts recently determined sleeper berth time logged in excess of eight hours per day is compensable and counts as hours worked. (Julian v. Swift Transport. Co. Inc. and Browne v. P.A.M. Transp., Inc). The basis for their reasoning was that over-the-road drivers are “on-duty” 24 hours per day. The judge said that drivers should be paid at least minimum wage for time spent off-duty and in their sleeper berths. The ruling doesn’t institute any new requirements for carriers, but it could open the door to lawsuits brought by drivers

The Ninth Circuit Court of Appeals and the U.S. District Court in Nebraska previously reached a different result. Those courts held sleeper berth time was not compensable hours of work unless the driver actually performed work in the sleeper berth, according to a U.S. Department of Labor regulation that specifically addresses the issue. Having to account for sleeper berth time obviously is a big deal because that’s a lot of time every day that would be considered compensable.

Given the different court holdings, carriers should review their policies to ensure that drivers-while logged as “off duty” or “sleeper berth”-are relieved of all duties related to the equipment and the load. For example, drivers should not be required to respond to communications or to guard a load during this time. Carriers should train drivers and then periodically remind them that they must log all work time as on duty.

Dynamex Legislation Passes California Assembly

On Wednesday, May 29, 2019, California’s legislative Assembly passed AB 5, which seeks to codify the ABC Test set forth in the Dynamex decision. This proposed new law expands the Dynamex ruling to apply to all of California’s Labor and Unemployment Insurance Codes. While the legislation codifies the test set forth in Dynamex as applied to Industrial Welfare Commission wage orders, it also makes life even more challenging for average Owner-Operators and the companies using them. The best hope now is that the legislature will take trucking business considerations into account during necessary compromise negotiations with the state Senate, and the bill will be modified from its present form to address some key issues and perhaps exempt trucking companies. Currently, the bill would exempt doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairstylists and barbers who rent booths at salons, and marketers and human-resources professionals with advanced degrees.

Under the ABC test, a worker will be deemed to have been “suffered or permitted to work,” and thus an employee for wage order purposes, unless the employer proves:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(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 the work performed.

But AB 5 actually goes beyond Dynamex: it would expand the ruling to apply to unemployment insurance taxes – which was not covered within the Dynamex decision – thereby exposing trucking companies to additional employment costs for which they would be liable.

As currently drafted, the legislation specifically identifies several industries that are exempt from application of the Dynamex standard and would, instead, be subject to the pre-Dynamex test that was set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. Although the trucking industry is not included in the list of exempted industries, stakeholders continue to work with the legislation’s sponsor to establish a workable exemption for the trucking industry. The legislation will next be heard in the California Senate Labor Committee.

However, there is still a chance that if Trucking does not get an exemption, the argument that Federal law preempts California law on the question of whether Owner-Operators are actually independent contractors is still in play. Unfortunately, there’s still uncertainty as to where things stand in California with regard to independent contractors in the trucking industry due to ongoing legal battles on the federal preemption question. Ultimately, the US Supreme Court may have to decide the question once and for all. Stay posted for developments.

Is Your Non-Compete Agreement Enforceable

I regularly get asked if Non-Compete agreements are enforceable. Many motor carriers have experienced both the offensive and defensive side of non-compete agreements. On one hand, trucking companies have drafted agreements to protect their legitimate business interests (e.g., customer relationships and confidential information). On the other hand, trucking companies have tried to hire workers who are subject to their own non-compete agreements. This is an uncertain area of law and I’m frequently asked “Is this thing enforceable?”

Contributing to the uncertainty, California is particularly hostile to non-competes. With a few exceptions, California courts will not enforce non-compete agreements against departing workers, and post-employment restrictive covenants – therefore this is a difficult jurisdiction for the enforcement of non-compete agreements. The question usually comes down to whether an exception applies.

Therefore, motor carriers should pay close attention to the rules in California and draft agreements that meet only their specific needs. Enforceability depends on a motor carrier’s success in convincing a court that it carefully crafted a narrowly-tailored agreement designed to protect a legitimate, protectible interest. Enforcement problems often result from over-reaching: Asking all employees to sign non-compete agreements rather than just those with customer relationships or access to confidential information. Geographic restrictions that are too broad and far exceed the worker’s geographic area of responsibility. Insisting on a broad geographic non-compete when a more limited (and more enforceable) client-specific non-solicitation provision would suffice. Prohibiting a worker from working in any capacity for a competitor is generally always invalid.

From a defensive standpoint, motor carriers should consider the consequences of hiring an employee who is subject to an ongoing non-competition obligation to a former employer. This consideration should include an analysis of whether the prospective employee can be effectively utilized despite the non-compete and the cost and time of defending against a noncompete lawsuit.

(More) Bad News For California Trucking Companies Using ICs.

by gspencermynko

When you think things can’t get any worse in California for trucking companies who use ICs, they do.

I hate to be the bearer of bad news, but this is serious business that can easily ruin trucking companies and their owners. California trucking companies need to be acutely aware of these two major setbacks.

Federal Appeals Court Rules Dynamex ABC Test Applies Retroactively

The Federal Ninth Circuit Appeals Court ruled in Vazquez v. Jan-Pro Franchising International, Inc. that the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court applies retroactively. In Dynamex, the Supreme Court adopted a new standard for determining whether a California worker is an employee or independent contractor under the California Industrial Welfare Commission’s (“IWC”) wage orders. The Ninth Circuit’s ruling in Vazquez should be of particular concern to trucking companies, who now face potential liability for their past decisions to classify owner-operators as independent contractors rather than employees under a standard that did not exist at the time. Prior to Dynamex, the “Borello” or “Common-Law” test applied.

In Vazquez, a case that had been pending for almost 10 years prior to the Dynamex decision, the employer, a janitorial cleaning business, prevailed in their motion to dismiss minimum wage and overtime claims stemming from allegations that janitors had been misclassified as independent contractors. The employees appealed. The Dynamex decision was issued while the case was on appeal.

The employer argued that Dynamex did not apply retroactively. But of course, The Ninth Circuit disagreed. The Ninth Circuit ordered the lower court to apply Dynamex’s “ABC” test retroactively.

The California Labor Board (known formally as the Dept. of Labor Standards Enforcement, or DLSE) dramatically expands the scope of the Dynamex ABC Test.

The DLSE – my favorite kangaroo court – handed down a written “Opinion Letter” that essentially requires their deputy commissioners (the non-lawyer, non-judge individuals who decide your fate) to give the death penalty to any and all trucking companies who utilize independent contractors. This is no exaggeration: If you are a trucking company and you hire independent contractors (who are truly and genuinely independent in the sane world – i.e.: anywhere besides California and Massachusetts), you are going to get your ass handed to you at the California Labor Board to the point where it is highly unlikely you will survive unless you switch to an Asset-Based, Employee-Model Trucking Company. Let’s say you own no trucks and you rely on Bonafide Owner-Operators who bring their own equipment to the table: Well, those Owner-Operators are – that’s right – YOUR EMPLOYEES! Congratulations! You are now liable for Payroll, Withholdings, Unemployment Insurance, Disability Insurance, and Workers’ Compensation Insurance. And because you weren’t doing any of those things, you are now on the hook for every conceivable Labor Code violation for not treating these Independent Contractors as employees, including BIG penalties and BIG (10%) interest going back to the “start” date of the violations.

The day after the Ninth Circuit Court of Appeals ruled that Dynamex applies retroactively, the DLSE released an opinion letter concluding that Dynamex’s ABC test applies to both IWC Wage Order claims and the Labor Code provisions that enforce Wage Order requirements. The California Supreme Court ruled that Dynamex applies only to claims brought under the IWC Wage Orders: But not according to the DLSE, whose recent opinion letter seems to expand what that means.

The DLSE’s opinion letter reflects the way that agency (and their lackey commissioners) will be interpreting Dynamex moving forward. This will impact trucking companies who face DLSE wage claims where owner-operators contend they were improperly classified as independent contractors.

Here’s the background:

In its opinion letter, the DLSE stated that, because wage order provisions are not independently actionable, “the obligations imposed by the wage orders do not appear only in the wage orders themselves. Wage order obligations are also imposed by certain Labor Code provisions, which serve to enforce the wage orders.” Therefore, the DLSE concluded that Labor Code provisions that implicate or “derive” from employer obligations under the IWC Wage Orders are also subject to Dynamex’s ABC test. The opinion letter specifically mentions the following Labor Code provisions:

minimum wage (Labor Code sections 1182.12 and 1197);
overtime (Labor Code sections 510 and 1194);
liquidated damages (Labor Code section 1194);
meal and rest periods (Labor Code sections 226.7 and 512);
itemized wage statements (Labor Code section 226); and
expense reimbursement claims (Labor Code section 2802).

With respect to waiting time penalties under Labor Code section 203, the DLSE said applying the ABC test to those claims would be appropriate “[w]here section 203 serves to enforce the underlying minimum wage and overtime obligations of the wage orders.”

Please note, the IWC Wage orders do not address liquidated damages, waiting time penalties, wage statements, among other matters: But the DLSE is basically saying “So What”. So again, if your a trucking company and you are being dragged to a Labor Board Hearing, prepare to die.

The California Labor Board – Your Guilty Until Proven Innocent

This statement could easily be dismissed as the ramblings of a bitter and cynical lawyer, if they unfortunately weren’t true. Here’s how it works: A driver decides he or she wants to screw you. They file a Labor Board complaint making all sorts of allegations, usually without proof. (Proof is optional at the Labor Board). You deny the allegations and put forth evidence that the driver was properly classified and fairly paid. The result? YOU LOSE! Because if a claimant says something at a labor board hearing, it MUST BE TRUE. Some of my readers may be rolling their eyes, but if I hadn’t witnessed this myself, I too would be skeptical of such a statement.

One client’s nightmare.

I recently represented a trucking company at a labor board hearing in Sacramento. Unfortunately for my client, things did not go well. Here’s the background: my client, a trucking company, tendered loads to another trucking company, who then hired independent contractors to actually deliver the loads. While I realize my client was “double brokering”, that was not an issue at the labor board hearing and had no relevance to the proceedings.

The trucking company (I’ll refer to them as trucking company X) my client tendered the loads to had valid operating authority, and as I stated above, relied on owner operators to deliver the loads. Indeed, under the old common law or Borello test, these drivers were genuine independent contractors. They owned their own equipment and were responsible for its maintenance, insurance, and fuel, and operated as bona fide independent drivers. Some of them drove for other companies. They could accept or reject loads as they pleased. You get the picture.

What is important about this case is that my client had no direct dealings with the owner operators hired by trucking company X. My client had no involvement in determining who trucking company X hired to deliver the actual loads. Indeed, my client was completely removed from the business operations and trucking operations of trucking company X.

The result? The labor Commissioner decided that the owner operators/independent contractors who were contracted with trucking company X, were also employees of my clients! WTF?

The deputy labor Commissioner completely disregarded the law on co-employment and determined that somehow, magically, trucking company X’s owner operators were my client’s employees.

What was particularly disturbing about this, was that my client and I put forth credible evidence that my client had no control over the activities of trucking company X, and had no input on who actually delivered the loads. Furthermore, my client put forth credible evidence that they believed trucking company X was actually delivering the loads.

The Claimant came down to the labor board with no evidence whatsoever. He simply made a bunch of allegations without any proof, the deputy commissioner asked him some questions, and that was all that was required for this guy to win his case. Remember – this guy drove for trucking company X and had no direct dealings with my client!

The labor Commissioner went out of her way to give him more than what he was asking for. She tacked on interest, penalties and awarded him money for stuff he wasn’t even asking for. This was the most ridiculous and unfair experience I’ve ever had as a lawyer.

Notably, this case is now being appealed. However, in order to appeal, My client had to put up a bond for the (substantial) amount of the award in order to pursue the case in Superior Court, where hopefully justice will be served.

My advice: if you want to use independent contractors, get out of California. If you want to stay in California, buy your own fleet of trucks and only work with employee drivers. There is no in-between. The State of California is on a mission to crush you out of business if you hire Owner-Operators.

Labor Board judgments can easily reach hundreds of thousands, if not millions of dollars. Furthermore, the DLSE can hold the owners, directors and managers personally liable for a judgment you cannot discharge in bankruptcy.