California’s AB 5 Has Been Repealed, Sort Of.

Rain rain go away, come again another day.

When Zeus sends his thunderbolts into Cleveland, Zippy gets scared. The snow, wind, and rain don’t bother her, but the thunder and lightning cause her to shake. Usually she hides in the shower.

Seeking shelter from the storm (apologies to Robert Zimmerman) is what California businesses are doing too. Assembly Bill 5 (AB 5), codifying the ABC Test for determining who is an employee, has been in effect since January 1, 2020.

On Friday, a new law repealed and replaced it. This new law, AB 2257, passed both chambers in the California legislature unanimously and was signed into law September 4 by Gov. Newsom. It contains an urgency clause, which means it takes immediate effect. So AB 5 is gone.

Great news for businesses, right? Not exactly.

AB 2257 moves the ABC test to a different part of the California Labor Code– new Sections 2775 through 2787–and cleans up some of the confusing and poorly considered language in AB 5. It does not, however, provide relief from the ABC Test for most large businesses.

The revisions make it easier for entertainers, freelance writers and photographers, and digital content aggregators to maintain independent contractor status. It scraps the arbitrary 35-article limit for freelance writers to maintain independent contractor status. It allows entertainers to perform single event gigs without becoming employees. It cleans up some other language too, but it does not make substantial changes that would excuse large businesses from the ABC test.

For example, subsection 2750.3(f) of AB 5 addressed whether an exception applies for work requiring a license from the Contractors State License Board (CSLB). The exception, with its multi-part test, is unchanged. It just moves to a new section of the Labor Code, new Section 2781.

One small glimmer of hope comes from some clarifying language for the business-to-business exception. That exception still does not apply for work that requires a CSLB license. To fall within that exception (meaning that the ABC Test would not apply), one of the requirements is that the work must be performed for the benefit of the contracting business, not its customers. Under the revised law, that requirement goes away if “the business service provider’s employees are solely performing the services under the contract under the name of the business service provider and the business service provider regularly contracts with other businesses.” For grammarians who despise double negatives, this is an exception to the exception. You’re welcome. What it means is if your subcontractor has its own employees, operates as its own business, and performs work not requiring a CSLB license, it may be easier to meet the business-to-business exception, thereby avoiding the ABC test.

So where does that leave us? On one hand, the fact that the bill passed both chambers unanimously shows a recognition that AB 5 had some serious flaws. But on the other hand, the fixes that both chambers thought were appropriate are of minimal help to large businesses. It’s like unleashing a horrible lab-created supermonster, then deciding that its eyelashes should be less curly. The largely-superficial changes in AB 2257 are mainly designed to help maintain independent contractor status for individuals who truly run their own businesses, particularly in the entertainment, journalism, and digital content fields.

This new law obliterates AB 5 in name, but not in function.

Like the blanket I gave Zippy, this move by the California legislature is not likely to provide any shelter from the storm. The ABC Test in California remains alive and well. Whether you grab a blanket or hide in the shower, the ABC Test is here to stay.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Never Surrender: Appeals Court Grants Reprieve for Ride Share App Companies; Focus Turns to Prop 22.

Album cover: Boy in the Box.
Label: Aquarius in Canada, EMI America in the U.S.
Sleeves: Definitely rolled up if you could see them.

Thank you to Canadian singer Corey Hart for providing the theme to this week’s post. The Number 3 song this week in 1985 opens with, “Just a little more time is all we’re asking for.” The song, of course, is Never Surrender.

Last week we wrote about the preliminary injunction granted by a California Superior Court, preventing ride share app companies statewide from continuing to classify drivers as independent contractors. We called that ruling “Act I” because the matter was headed to appeal.

As expected, the matter was immediately appealed. Now it’s time to queue up Canada’s Juno Award winner for 1985 “Single of the Year“:

Just a little more time is all we’re asking for.

‘Cause just a little more time could open closing doors.

In a more musical world, those would have been the opening lines to the Motion for Stay in the Court of Appeals. Regardless, the motion was granted, and the ride share app companies are not going to reclassify anyone quite yet.

If the stay was not granted, the ride share app companies had threatened to shut down in California.

Oral arguments are scheduled for mid-October, which means a decision is months away. As we expected in last week’s post, the real action is on Proposition 22, on the ballot this November.

If Proposition 22 passes, the new ABC Test in Assembly Bill 5 (which went into effect Jan. 1, 2020) would not apply to workers in the app-based rideshare and delivery business. Instead, those workers could stay classified as independent contractors, but the app-based companies must ensure that the drivers receive a predetermined level of compensation and benefits, including:

  • Earnings Minimum. The measure would require app-based companies to pay at least 120 percent of the minimum wage for each hour a driver spends driving—but not time spent waiting for requests.
  • Health Insurance Stipend. The measure would require rideshare and delivery companies to provide a health insurance stipend of about $400 per month to drivers who regularly work more than 25 hours per week (not including waiting time). Drivers who average 15 driving hours per week but less than 25 driving hours would receive half as much.
  • Medical Expenses and Disability Insurance. The measure would require that companies buy insurance to cover driver medical expenses and provide disability pay when a driver is injured while driving.
  • Rest Policy. The measure would prohibit drivers from working more than 12 hours in a 24 hour period for a single rideshare or delivery company.
  • Other. The measure would require that rideshare and delivery companies have sexual harassment prevention policies and conduct criminal background checks and safety training for all drivers. It also would prohibit discrimination in hiring and firing.

The measure would also prevent cities and counties from passing further restrictions on driver classification.

Here’s the webpage for Yes on 22. Keep a close eye on the results of the vote because it will probably determine the future of ride share in California.

And don’t forget to wear your sunglasses at night.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Something Is Rotten in the State of California? Ride Share Misclassification Ruling Is Merely Act I

CA flag pole

“To be or not to be” are the opening words of a soliloquy by Prince Hamlet. With that, I have exhausted what I remember about Shakespearean plays without consulting Wikipedia. Having consulted Wikipedia, I can confirm that this soliloquy occurs in Hamlet, Act III, Scene 1.

A lot happens in Act III and beyond, and if you stopped reading Hamlet after Act I, you’d miss most of the action, including assorted plotting, scheming and mayhem.

Last week in California, a different kind of mayhem began in a major case involving alleged independent contractor misclassification. In California v. Uber, a state superior court judge granted a preliminary injunction, requiring ride-sharing app companies to reclassify California drivers as employees. But this order might not be the poisoned blade it seems to be. Either the ruling is a substantial blow, or it’s much ado about nothing. For now, it’s too early to tell. We’re still in Act I. Like in Hamlet, the real action will be in the later acts.

Read the rest of the post here, on BakerHostetler’s Employment Law Spotlight Blog.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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New Rules for Drivers? California’s ABC Test Could Change Again in 2021

Worst parking.jpg

Rebellious? Indifferent? Clueless? I’m still trying to understand how this car thought it was ok to take up FOUR parking spaces in the parking lot at a Walgreens near my house.

Any one of the spaces seems suitable for a car of ordinary proportions. I have parked in most of these four spots before, and my experiences were uniformly positive. I’d give four stars to each spot. Reliable, met expectations. Near enough to the store entrance. Picking just one of the four would be an excellent way to start your shopping experience.

When people don’t like the rules they’re expected to follow, one approach is to try to change the rules. That’s what ride share and delivery app companies are doing in California.

Late last month, these companies achieved an important milestone, reaching the 625,000 signature threshold for a November ballot initiative that, if passed, would change the test in California for determining Employee vs. Independent Contractor. The measure will now appear on California ballots, giving voters the chance to override A.B. 5 for ride share and delivery app companies.

If the initiative passes, the new ABC Test would not apply to workers in the app-based rideshare and delivery business. Instead, those workers could stay classified as independent contractors, but the app-based companies must ensure that the drivers receive a predetermined level of compensation and benefits, including:

  • Earnings Minimum. The measure would require app-based companies to pay at least 120 percent of the minimum wage for each hour a driver spends driving—but not time spent waiting for requests.
  • Health Insurance Stipend. The measure would require rideshare and delivery companies to provide a health insurance stipend of about $400 per month to drivers who regularly work more than 25 hours per week (not including waiting time). Drivers who average 15 driving hours per week but less than 25 driving hours would receive half as much.
  • Medical Expenses and Disability Insurance. The measure would require that companies buy insurance to cover driver medical expenses and provide disability pay when a driver is injured while driving.
  • Rest Policy. The measure would prohibit drivers from working more than 12 hours in a 24 hour period for a single rideshare or delivery company.
  • Other. The measure would require that rideshare and delivery companies have sexual harassment prevention policies and conduct criminal background checks and safety training for all drivers. It also would prohibit discrimination in hiring and firing.

The measure would also prevent cities and counties from passing further restrictions on driver classification.

I wrote more about this bill here, leading the post with a harrowing flight selection option offered on my United app.

So if you‘re reading this post from the Left Coast, get out and vote in November. You can make a meaningful change in the way that California approaches the question of Who Is My Employee? In the meantime, drive safe, wear your mask, and park within the lines.

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Worried about ABC Tests? Here’s What You Have to Look Forward to.

balloons-1786430_1280

Recent coronavirus-related conversation in my house, after cancellation of planned spring break vacation, loss of kids’ summer internships, suspension of in-person college classes, and more than one day of snow in May:

Lisa: This is getting ridiculous. We need something to look forward to.

Me: 2021?

It may feel like there’s not much to look forward to lately, but if you’re into watching state bills on independent contractor misclassification, I’ve got some exciting news for you! Not really. No one’s into that. But I’m going to share anyway.

Seven states are currently considering bills that would adopt strict ABC Tests for determining whether someone is an employee or an independent contractor. What do I mean by “strict ABC Tests”? I mean the same test California recently adopted in Dynamex and under Assembly Bill 5. I mean the test where anyone performing services is presumed to be an employee unless all three of these things are proven, with part B being the hardest to meet:

(A) 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) the worker performs work that is outside the usual course of the hiring entity’s business, and 

(C) the worker is customarily engaged in an independently established trade, occupation, or business.

So which states are vying for the title of Miss California? Here are the 7 states with bills currently pending that, if passed, would adopt a strict ABC Test:

  • Massachusetts – would expand test to unemployment
  • Michigan
  • Minnesota
  • New Jersey – switching from looser part B
  • New York
  • Pennsylvania – for gig-based platforms only
  • Rhode Island

I’ll continue to minor these bills, mainly because I know no one else wants to. But at least we all have something to look forward to.  Happy new year?

© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Did a State Supreme Court Just Rewrite a Key Definition in Independent Contractor Misclassification Law?

knowtherulesFor businesses using independent contractors and concerned about misclassification claims, there hasn’t been too much to get mad about lately. As of last week, I’m just mad about saffron. (She’s just mad about me.)

But a recent decision by the Pennsylvania Supreme Court may change that. The PA Supreme Court just took a commonly used phrase in Employee vs. Independent Contractor tests and gave it a new meaning. (Fun fact about change: If you change your name, you probably can’t include a numeral or punctuation.”)

Under PA unemployment law, anyone receiving pay is an employee for unemployment insurance purposes, unless the individual is (a) free from control and direction, and (b) customarily engaged in an independently established trade, occupation, profession or business. Traditionally, that’s a test that’s been considered pretty easy to meet. Maybe not anymore.

Addressing part (b), the PA Supreme Court ruled that to be “customarily engaged in” an independent business, the individual must — right now — “actually be involved, as opposed to merely having the ability to be involved, in an independently established trade, occupation, profession, or business.”

The Court looked to see whether the contractor actually operated his/her own business. Merely being allowed to do so wasn’t enough. It may still be enough if the contractor advertises his/her services to the public, even if a contractor doesn’t have other customers at that particular time. But the contractor needs to take some affirmative steps that show that the contractor is — at that time — “actually involved” in an “independently established trade, occupation, profession or business” at the same time the contractor is being paid by whatever company doesn’t think that worker is its employee.

If this “actually engaged” standard is applied in other states, it may make it harder in other states to maintain independent contractor status. States that have a similar “customarily engaged in” requirement in one or more of their misclassification tests include:

  • Alaska
  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Georgia
  • Hawaii (apostrophe before the last i or no? I never know.)
  • Indiana
  • Lousiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Montana
  • Nebraska
  • Nevada
  • New Jersey
  • New Mexico
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Utah
  • Vermont
  • Washington
  • West Virginia
  • Wisconsin

Yikes. In most of these states, the “customarily engaged in” language is in the statutes covering who is an employee for unemployment insurance, but some of the states also include this as part of their test for other laws.

In California and Massachusetts, for example, that language is part C of the dreaded ABC Test that addresses other aspects of the employer-employee relationship.

To be safe, companies should consider requiring independent contractors to provide some proof that they are “actually engaged in” an “independently established trade, occupation, profession or business.” The proof might consist of evidence that they advertise for other customers or that they have other clients. What’s considered sufficient in one state might not be good enough in another.

While coronavirus seems to be dominating the news cycle, let’s not lose sight of the fact that independent contractor relationships are still under attack. Companies should do what they can to be proactive. Now it a good time to evaluate your relationships with contractors to make sure they can withstand a challenge.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Bring Forth the Tiger-Dogs! Here’s a Quick Status Check on the Challenges to California’s New Independent Contractor Law

Tiger independent contractor dynamex california

Not an actual tiger. Or a dog.

When outside forces pose a threat to people’s livelihood, people will go to great lengths to fight back.

For example, when monkeys began ravaging the crops of a farmer in Karnataka, India, the imaginitive farmer painted his dog to look like a tiger, to scare away the pesky invaders. [Photo here.]

Business owners in California are taking more conventional measures to fight back againt the tyranny of Assembly Bill 5, the new California law that seeks to reclassify many of the state’s independent contractors as employee. Here’s a quick summary of the resistance:

  • Owner-operator truckers claim the new California law cannot be applied to them because of a federal law (FAAAA) that prohibits states from enacting their own laws that affect the “price, route, or service of any motor carrier with respect to the transportation of property.” They won a preliminary injunction last month, temporarily preventing the law from applying to them.
  • Freelance writers and photographers are challenging the law too. The law has an exception for freelancers, but the exemption goes away if freelancers submit 35 or more pieces to a single publication. In other words, they’re independent contractors for submissions #1 through #34, but they instantly become employees with submission #35. They argue that the exemption is arbitrary and violates their First Amendment and equal protection Rights.
  • Rideshare and food delivery apps filed their own lawsuit, alleging that the exemptions are arbitrary and violate their equal protection and due process rights.
  • Five gig economy app companies have contributed $110 million to a ballot measure that will be voted upon in the November 2020 election if the measure collects 625,000 signatures. The law would exempt app-based gig economy drivers from the new test if the companies provide workers with specific levels of pay, benefits, and rights, which are defined in the proposal.
  • Republican lawmakers have proposed a constitutional amendment (A.C.A. 19) called the “Right to Earn a Living Act,” which would overturn Assembly Bill 5 and enshrine in California law “the right to pursue a chosen business or profession free from arbitrary or excessive government interference.” The amendment would reinstate California’s S.G. Borello balancing test for determining whether a worker is an independent contractor or an employee.

Meanwhile, the California Supreme Court is considering whether the 2018 Dynamex decision, which first imposed the ABC Test for wage and hour claims, applies retroactively. If it does, then businesses can be liable for failing to comply with a test that did not yet exist. Really.

That’s a lot of action, and we’ll continue to watch for new developments. Meanwhile, California businesses that use independent contractors should tread carefully, follow the status of legal challenges, and paint their dogs to look like tigers — just in case that turns out to be effective.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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When The Rules Do Not Apply: Freelancers’ Lawsuit Challenges California’s New ABC Test

piano IMG_2111

I was headed to an appointment last week when I came upon this sign. Sometimes the people who make the rules just assume the rules don’t apply to them. Or sometimes people don’t even think about the rules and whether they make sense.

I was tempted to take the sign off the piano, in the interests of following the directive on the sign. But I just took a picture instead.

This post is about when the rules should apply.

Since California’s new ABC Test law (Assembly Bill 5) went into effect January 1st, the legal challenges have been rolling in. (See this post, for example.) The latest groups to challenge the new law are freelance writers and photographers.

Wanna know something absurd? Of course you. We all do. That’s why we read the internet on our phones during meetings. Under the new law, freelancers are exempt from the ABC Test — and can likely remain independent contractors — if they make 35 or fewer submissions to a publication in a year. But with the 36th submission, the ABC Test suddenly applies, meaning that same freelancer would more likely become an employee, retroactive to the first submission.

What is so special about the 36th submission that would convert a freelancer from an independent contractor to an employee? All together now: “Nothing!” This law is ridiculous. A newly filed lawsuit asks a court to invalidate that limit on the basis that it is arbitrary, which it absolutely is. The lawsuit alleges that the arbitrariness violates the freelancers’ Equal Protection and First Amendment Rights.

Freelancers don’t want to be employees for two reasons.

First, works created by contractors are owned by the contractors, who can license the works and earn a fee. That’s how they make money — and is the reason why freelance journalists are all so rich. (That’s for my daughter, who’s in journalism school and doesn’t eat ramen noodles. Yet.) In contrast, under the U.S. Copyright Act, works created by an employee are owned by the employer. That means the freelancer who created the work loses the rights to it. So, if we apply the new rule, that would mean Submission #36, which likely converts the freelancer to a retroactive employee, also converts ownership of Submissions #1-35 to the employer. No way that’s fair.

Second, for every action there’s a reaction. Publishers are not stupid. They don’t want freelancers to become their employees either. So what will they do once a freelancer hits the 35-submission limit? They won’t accept any more submissions. That hurts the publication and the freelancer. Or maybe they will want some freelancers to become their employees so they can commandeer ownership of Submissions #1-35. Either way, this is absurd.

If you’d like to read more, here’s a copy of the complaint. The lawsuit is pending in federal court in the Central District of California.

And please don’t place anything on top of the piano.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Voters Would Reject This Flight Option, But They Could Change Independent Contractor Law in California This November

Expensive flight

A few years back, I found myself headed to the Houston airport earlier than expected after a business trip. I decided to check my phone to see whether I could get on an earlier flight back home to Cleveland.

Turns out I could — for $52,270. For coach. There was also a first class seat available. For $69,570.

I declined and decided to wait the three hours for my originally scheduled departure. But for good measure, I took this screenshot because, hey, why not.

Taking the earlier flight would not have been a good use of my money. The real subject of this post is about five app-based companies who are making much better use of their money.

With app-based companies under constant attack through independent contractor misclassification claims, and with California’s new Assembly Bill 5 making it even harder to classify people as independent contractors, the major providers are fighting back.

They’ve pledged $110 million to support a ballot initiative in California that would redraw the lines in the Employee vs. Independent Contractor debate — at least for rideshare and delivery drivers.

Under current federal and state laws, a worker is either an independent contractor or an employee. It’s binary. Employees get lots of protections. Contractors get almost none. There’s no third category that would allow rideshare and delivery drivers to operate independently while receiving a minimum level of legal protection.

This proposed initiative would change that. The law would create new rules for app-based transportation providers and drivers in California.

If the initiative passes, the new ABC Test would not apply to workers in the app-based rideshare and delivery business. Instead, those workers could stay classified as independent contractors, but the app-based companies must ensure that the drivers receive a predetermined level of compensation and benefits, including:

  • Earnings Minimum. The measure would require app-based companies to pay at least 120 percent of the minimum wage for each hour a driver spends driving—but not time spent waiting for requests.
  • Health Insurance Stipend. The measure would require rideshare and delivery companies to provide a health insurance stipend of about $400 per month to drivers who regularly work more than 25 hours per week (not including waiting time). Drivers who average 15 driving hours per week but less than 25 driving hours would receive half as much.
  • Medical Expenses and Disability Insurance. The measure would require that companies buy insurance to cover driver medical expenses and provide disability pay when a driver is injured while driving.
  • Rest Policy. The measure would prohibit drivers from working more than 12 hours in a 24 hour period for a single rideshare or delivery company.
  • Other. The measure would require that rideshare and delivery companies have sexual harassment prevention policies and conduct criminal background checks and safety training for all drivers. It also would prohibit discrimination in hiring and firing.

The measure would also prevent cities and counties from passing further restrictions on driver classification.

The initiative needs 625,000 signatures to appear on the November 2020 ballot in California. I expect they’ll get the signatures, and then the media campaign will kick into high gear. Expect TV and radio ads, billboards, and a heavy social media push to garner support.

If the ballot measure passes, that will have been money well spent — a much wiser use of resources than for some dodo to pay $52,270 to take an earlier flight home from Houston. The proposed law would create a fairer and more predictable set of rules for drivers and companies, and it should substantially reduce the rampant misclassification lawsuits in the rideshare and delivery driver area.

I’ll be watching for similar proposed legislation in other states. And I’ll be watching airfares too, before I switch any future flights.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Dead or Not Dead? Schreiber Lives On, But California’s New ABC Test Is Temporarily Killed for Owner-Operator Truckers

Prison dead independent contractor ABC TestWhen Benjamin Schreiber was sentenced to life in prison for clubbing a man to death with the wooden handle of a pickaxe, he probably expected to die in prison. But then fate intervened. Or did it?

In 2015, Schreiber fell severely ill in the Iowa State Penitentiary and had to be resuscitated five times. Schreiber then filed for post-conviction relief. He argued that he did, in fact, die in prison. Since he had to be resuscitated, he must have died, which means that he had successfully completed his “life sentence” — just before being resuscitated.

The argument failed. The judge ruled, “Schreiber is either alive, in which case he must remain in prison, or he is dead, in which case this appeal is moot.”

The decision did not say how many points Schreiber was awarded for creativity.

Two time zones west of Iowa, the California Truckers Association had better luck in its effort to kill California’s new ABC Test for independent contractor misclassification, at least as far the law applies to owner-operator truckers.

On December 31, a federal judge issued a preliminary injunction, preventing California from applying the new ABC Test to owner-operator truckers.  That means, for now, the question of whether an owner-operator trucker is an employee or an independent contractor must still be determined under the S.G. Borello balancing test in California, not the strict new ABC Test.

This is just a preliminary injunction, not a final ruling, so it is subject to further review even at the district court level, before the inevitable appeal.

The winning argument (for now) is that the law imposing the new ABC Test, Assembly Bill 5, is preempted by the Federal Aviation Administration Authorization Act (FAAAA).  The FAAAA preempts state law that affects the price, route, or service of any motor carrier with respect to the transportation of property.

The federal circuit courts of appeals are split on whether the FAAAA preempts state independent contractor laws as they relate to owner-operators in the transportation industry.  The 7th and 3rd Circuits have held that there is no preemption.  The 1st Circuit has held that there is preemption.

Ultimately, the question is likely to be settled by the Supreme Court.

For right now, the balancing test has been resuscitated for owner-operator truckers, but only a little bit like Mr. Schreiber’s resuscitation.

Hopefully, the stay will remain in effect until the case makes its way up the appellate ladder. And hopefully, dead is dead when it comes to the ABC Test and owner-operators.

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© 2020 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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