On January 15, 2020, William Highberger, a Los Angeles Superior Court judge, ruled that truck drivers are exempt from California’s new gig-work law, as federal law preempts the new legislation. This first court decision on the validity of the law, AB5, affects Dynamex, a delivery company that lost a court case after allegedly improperly classifying its drivers as independent contractors.
Our tax attorneys have learned that beginning January 1, 2020, AB5 would determine whether a California worker is an employee or an independent contractor. Workers were told to seek help if they believe they have been misclassified.
Some Truck Drivers Oppose Forced Employee Status
Some big-rig owner-operators have opposed reclassification as employees, having invested $150,000 or more into their tractor-trailers or large trucks as independent businesses. Conversely, some claim they were exploited by their companies by working overtime without pay and other benefits, or risking suspension.
Appeals Court Overturn Predicted
UC Hastings law professor Veena Dubal, an advocate for gig workers, predicted the decision’s overturn on appeal. She compared it to previous cases, including Dynamex’s, which claimed federal law doesn’t preempt AB5.
Los Angeles City Attorney Mike Feuer is planning to appeal. He won a 2018 lawsuit against NFI Industries and subsidiaries which misclassified their drivers as contractors. Feuer had them reclassified as employees because, at the ports of Long Beach and Los Angeles, those drivers “earned literally pennies a week at times ….” This lawsuit relied on a prior test for worker misclassification known as “Borello,” less rigid than AB5. In his ruling exempting California’s truck drivers from AB5, Judge Highberger said that their reclassification is not necessary, that companies can simply follow the Borello test.
However, the California Labor Commissioner ruled that Cal Cartage, a subsidiary of NFI Industries, had misclassified port truck drivers. Although Judge Highberger ruled differently, he said an appeals court decision on the validity of AB5 may be beneficial for Californians. It would answer this crucial question: Does federal law preempt state-level worker classification?
Ruling Called a Big Win for Big-Rig Operators
Attorney Joshua Lipshutz of Gibson Dunn stated that, for many decades, owner-operators of big rigs who work as independent contractors have been a crucial component of the trucking industry, and that such an option allows these drivers to own small businesses. He believed Judge Highberger’s ruling reassured Californians that a business model cannot simply be eliminated and force independent truck drivers to become employees. He called the ruling a big win for independent truck drivers and trucking companies.
Local media contacted Assemblywoman Lorena Gonzalez, D-San Diego and author of AB5. She was unavailable for comment, but she’s previously said that the big-rig trucking industry is rife with misclassifications.
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