AB5 and ABC: The Story Continues

Two recent decisions have clarified how courts might interpret and analyze California Assembly Bill 5 (AB5). In CTA v. Becerra, the Southern District of California granted a temporary restraining order on December 31, 2019 enjoining the state from enforcing AB5 as applied to motor carriers. A hearing for a preliminary injunction was held on January 13; and on January 16, the preliminary injunction was granted with important references to U.S. Congressional intent to allow for owner-operator/independent contractors in trucking.

Concurrently, in California v. Cal Cartage Transportation Express, LLC, a California Superior Court held that the B prong of the ABC test used in AB5 and in Dynamex is preempted by the Federal Aviation Administration Authorization Act (FAAAA). The court recognized that the FAAAA was specifically adopted – at least in part – to limit state rules that act to limit owner-operator entry into the industry. The order granting the preliminary injunction in Becerra concurs and even defers to the well-reasoned B2B analysis in Judge Highberger’s decision in the Cal Cartage case.

Importantly, the Becerra court denied the City of L.A.’s motion to intervene in the federal case, potentially limiting AB5 proponents’ ability to make overlapping arguments in the two cases. It now appears likely that the issue will make its way to the United States Supreme Court via appeals of the final Becerra decision through the Ninth Circuit. The next steps in that journey occurred on January 29th when the State of California and Teamsters filed their notices of interlocutory appeal to the Ninth Circuit. Of course, it is likely to take months or even years to reach the Supreme Court for consideration, at which time the Supreme Court could decide not to hear the case (as it did recently in a case considering similar issues under the Airline Deregulation Act – Brindle v. Rhode Island Dep’t of Labor and Training).

On the other coast, New Jersey continues to move forward with its efforts to create a more California-like environment. While New Jersey Senate Bill 4204 failed upon the legislature’s adjournment this week, it was immediately reintroduced as Senate Bill 863 and is poised to continue its high-profile consideration by the Senate. We continue to monitor this legislation and other legislation introduced by states attempting to model the changes made to the treatment of independent contractors by AB5.

Spotlight on Scopelitis Class Action Defense

Over the last 15 years, the transportation industry has been subject to an onslaught of wage-and-hour class actions. In the cover article for this issue of The Transportation Brief, Partners Greg Feary and Shannon Cohen discuss recent developments in case law and legislative efforts on the worker classification front. Legislative efforts like New Jersey’s efforts to adopt the ABC test for misclassification claims and California’s AB 5 ensure wage-and-hour class actions will continue to threaten transportation companies for the foreseeable future.

Led by Partners Jim Hanson, Adam Smedstad, Andy Butcher, and Chris Eckhart, the Scopelitis Class Action Defense Team has defended misclassification cases in every segment of the transportation industry, as well as claims brought by company drivers. Scopelitis litigators have defended hundreds of class and collective action cases across the United States, including cases in California, New Jersey, New York, Massachusetts, Illinois, and Washington.

The Scopelitis Team understands the intricacies of the industry and the best approach to defending clients. Regardless of the nature of the claims, the Firm vigorously defends clients leading to successful resolution of the claims. Recent examples include:

• Obtaining a meal and rest break preemption determination from the Pipeline and Hazardous Materials Safety Administration
• Submitting an amicus brief in support of the FMCSA’s decision preempting California’s meal and rest break rules

As one of the few legal teams in the country to have successfully tried multiple class actions to verdict, Scopelitis is at the forefront when it comes to making and defending the law. To learn more, contact Andrew J. Butcher, Christopher J. Eckhart, James H. Hanson, or Adam C. Smedstad.

PHMSA Fails to Act on “Harmonization” Rulemaking

Transportation providers are closely watching the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) “harmonization” rulemaking, which aims to bring U.S. rules regarding the transportation of hazardous materials into compliance with international standards. Among other things, the rulemaking would require manufacturers and “subsequent distributors” of lithium batteries to generate and make available a Lithium Battery Test Summary (LBTS) that includes certain information and confirms a lithium battery is safe to ship. The LBTS is already a part of the International Civil Aviation Organization’s (ICAO) standards for air transportation. In late 2018, PHMSA proposed that the LBTS would go into effect for domestic shipping on January 1, 2020.  That date has come and gone without the agency issuing a final rule. Scopelitis is monitoring the rulemaking and will update clients of new developments.

Hemp Transportation Remains Risky Business

The 2018 Farm Bill removed “hemp” and hemp-derived products containing a THC concentration of 0.3% or less from the definition of marijuana under the federal Controlled Substances Act.  States remain free to treat such products as illicit controlled substances, but cannot prohibit interstate transportation of hemp that is produced in accordance with a plan established or approved by the US Department of Agriculture (USDA).  Unfortunately, determining whether hemp qualifies for this safe harbor is no easy feat.

The USDA has established a website identifying states seeking USDA approval or intending to adopt the USDA plan. For any state not listed by USDA, the assumption must be that hemp produced in any such state would not qualify for the federal safe harbor for interstate transportation. Finally, the USDA regulations do not specifically address what documentation a carrier should have in its possession to prove to law enforcement the hemp cargo qualifies for the safe harbor.  As such, transportation companies will need to continue to exercise caution with respect to accepting shipments of hemp and hemp-derived products.

Choice of Law Questions Continue in California

Transportation companies outside of California face difficult questions about whether California law applies to their California operations. The Ninth Circuit recently held that California’s minimum wage and overtime laws applied to non-California resident baseball players employed by non-California teams playing in an intra-state California league (Senne v. Kansas City Royals Baseball Corp.). The court applied California law because the players worked “entire days or weeks” in California, and California’s choice of law rules favored application of California law. It is unclear whether California courts will extend the Senne court’s reasoning to (1) interstate drivers who only occasionally deliver loads to and from California and (2) other California claims, such as expense reimbursement, wage statement, and misclassification claims.

FLSA Conditional Certification Denied In Driver Case

Minimum wage compliance under the Fair Labor Standards Act is determined on a weekly basis: if the total weekly wages divided by the total hours worked exceed $7.25 per hour, the FLSA is satisfied. Further, the FLSA allows a plaintiff to bring a collective action on behalf of similarly situated employees. Before an FLSA case can proceed as a collective action, the court must conditionally certify the case. Courts generally grant conditional certification because the standard is quite lenient. In Shell v. Pie Kingz, LLC, the court denied the plaintiff’s motion for conditional certification. Because the plaintiff’s and other drivers’ wages and expenses varied every week, minimum wage liability could not be determined on a collective basis and instead required a week-by-week, driver-by-driver analysis, precluding collective treatment. Shell represents a rare win for the defendant at the conditional certification stage and should help transportation companies defend against proposed FLSA collective actions by drivers whose compensation, hours worked, and business expenses vary from week to week.