The U.S. Court of Appeals for the Ninth Circuit recently unanimously upheld a federal district court’s denial of a preliminary injunction in a suit challenging the constitutionality of California’s employee classification test. In its ruling, the appellate court rejected a trucking association’s challenges to the 2020 law under the dormant commerce and equal protection clauses of the U.S. Constitution. The case is Owner-Operator Independent Drivers Association Inc. et al. v. Bonta et al., Case Number 24-2341, U.S. Court of Appeals for the Ninth Circuit.
Assembly Bill No. 5 (AB 5) codified the three-prong ABC test for discerning whether a worker is an independent contractor or an employee. The California Supreme Court established the ABC test in a 2018 court decision, which determines whether a worker is an employee by finding that a company must demonstrate that the worker is free from its control, does not work within its line of business, and operates an independent business.
The Owner-Operator Independent Drivers Association (OOIDA) filed suit against the state of California, challenging the constitutionality of AB 5, a worker-friendly law that makes it more difficult for companies to classify workers as independent contractors rather than employees. In its lawsuit, OOIDA claimed that AB 5 burdened interstate commerce and discriminated against out-of-state drivers, seeking a preliminary injunction that would block the law as applied to motor carriers and owner-operator truck drivers.
However, according to the Ninth Circuit, OOIDA was unable to prove that the law places a “substantial burden on interstate commerce.” OOIDA conceded that AB 5 didn’t prevent out-of-state drivers from working in the state or favor in-state over out-of-state drivers. Furthermore, OOIDA failed to show how the business-to-business exception in AB 5 violated the equal protection clause, as it does not distinguish between intrastate and interstate drivers. The business-to-business exception allows businesses to contract with other businesses to get around AB 5.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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