In particular, as state legislatures continue to propose and pass strict independent contractor statutes, such as AB5 in California, or S2404/S863 in New Jersey, truck drivers across the country have brought class action claims alleging misclassification and attendant wage violations.
One key question that Courts have been grappling with is whether these restrictive state laws are preempted when applied to certain motor carrier operations by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). Circuit Courts across the country have come out differently on the issue over the past few years. The Ninth Circuit is the most recent Court to take up the issue, which we predict will soon find its way to the Supreme Court.
Additionally, the US Department of Labor recently issued proposed regulations on the classification of workers under the Fair Labor Standards Act (FLSA). Although the regulations are limited in their application to the FLSA, they reflect recognition by the federal government of the importance of this issue as the structure of the workforce changes. Find Arent Fox’s alert on the DOL proposed regulations here.
Preemption by the FAAAAThe FAAAA includes an express preemption provision, providing that states “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 ... with respect to the transportation of property.” 49 USC § 14501(c)(1).
Motor carriers have argued that the FAAAA preempts the application of state misclassification statutes to truck drivers because those statutes have the effect of impacting the “price, route, or service” of a motor carrier. This is due in part to the business model by which motor carriers operate. By way example, in the case of drayage work, when a boat comes into a port carrying containers, there often is an immediate need for those containers to be unloaded and transported to their destination. The number of containers, the timing of the arrival, and the destination location are different each time. Therefore, the carrier’s demand for truck drivers is constantly in flux. The independent contractor model provides flexibility and allows for this kind of on-demand service to be maintained.
Misclassification statutes vary by state, but the more restrictive statutes follow the ABC test, providing that an individual, in this case, a truck driver, is presumed to be an employee unless the motor carrier can demonstrate each of the following:
- The person 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;
2. The person performs work that is outside the usual course of the hiring entity’s business; and
3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Classes of drivers and unions, however, have argued that these state misclassification statutes are not “all or nothing” standards – that is, they do not categorically prevent the use of independent contractors – and that they, therefore, cannot be uniformly preempted under the FAAAA because they do not bind the motor carriers to a particular method of providing services, thereby impacting prices, routes, or services.
A Brief History of Circuit Level DecisionsIn 2016, the First Circuit took up the issue of FAAAA preemption in Schwann v. FedEx Ground Package Sys., Inc., 813 F.3d 429 (1st Cir. 2016). The First Circuit analyzed the second prong of the Massachusetts independent contractor statute, which required that an employer prove that the individual performs work that is “outside the usual course of the business of the employer” in order to qualify as an independent contractor. The Court found that under this prong, it would be impossible for motor carriers to utilize independent...
