Tuesday, February 18, 2020

More on California ABC and the FAAAA/Trucker Preemption Issue

The general challenge to California’s AB 5 is now on its way to trial absent a successful pre-trial motion by California state authorities. But readers may recall that a California federal district court recently upheld a challenge of the law as applied to truckers on Federal Aviation Administration Authorization Act of 1994 (FAAAA) preemption grounds in California Trucking Association (CTA) v. Becerra. It may be some time before we know the outcome of that case, but it seems clear the dispute will be analyzed by the 9th Circuit under its previous opinion in Dilts v. Penske Logistics, LLC, 769 F.3d 637 (9th Cir. 2014) (cert denied in 2015), which addressed whether California laws on meal and rest breaks were preempted by the FAAAA. The heart of that case concluded:

California's meal and rest break laws plainly are not the sorts of laws “related to” prices, routes, or services that Congress intended to preempt. They do not set prices, mandate or prohibit certain routes, or tell motor carriers what services they may or may not provide, either directly or indirectly. They are “broad law[s] applying to hundreds of different industries” with no other “forbidden connection with prices[, routes,] and services.” . . .. They are normal background rules for almost all employers doing business in the state of California. And while motor carriers may have to take into account the meal and rest break requirements when allocating resources and scheduling routes—just as they must take into account state wage laws . . . or speed limits and weight restrictions . . . the laws do not “bind” motor carriers to specific prices, routes, or services . . . Nor do they “freeze into place” prices, routes, or services or “determin[e] (to a significant degree) the [prices, routes, or] services that motor carriers will provide,” . . . Further, applying California's meal and rest break laws to motor carriers would not contribute to an impermissible “patchwork” of state-specific laws, defeating Congress' deregulatory objectives. The fact that laws may differ from state to state is not, on its own, cause for FAAAA preemption. In the preemption provision, Congress was concerned only with those state laws that are significantly “related to” prices, routes, or services. A state law governing hours is, for the foregoing reasons, not “related to” prices, routes, or services and therefore does not contribute to “a patchwork of state service-determining laws, rules, and regulations.” . . . It is instead more analogous to a state wage law, which may differ from the wage law adopted in neighboring states but nevertheless is permissible . . .

The analytical problem with the preemption provisions in the FAAAA, the Airline Deregulation Act (upon which the FAAAA provision was modelled), and ERISA (the granddaddy of all the sweeping preemption provisions) is, of course, their breadth, and it matters not whether that breadth results from laziness or lobbying. (Jim Wooten at University of Buffalo has done masterful work on the mysterious emergence of the ERISA preemption provision). In the context of the FAAAA, the Court in Dilts further observed:

. . . generally applicable background regulations that are several steps removed from prices, routes, or services, such as prevailing wage laws or safety regulations, are not preempted, even if employers must factor those provisions into their decisions about the prices that they set, the routes that they use, or the services that they provide. Such laws are not preempted even if they raise the overall cost of doing business or require a carrier to re-direct or reroute some equipment . . . Indeed, many of the laws that Congress enumerated as expressly not related to prices, routes, or services—such as transportation safety regulations or insurance and liability rules . . . are likely to increase a motor carrier's operating costs. But Congress clarified that this fact alone does not make such laws “related to” prices, routes, or services. Nearly every form of state regulation carries some cost. The statutory text tells us, though, that in deregulating motor carriers and promoting maximum reliance on market forces, Congress did not intend to exempt motor carriers from every state regulatory scheme of general applicability . . .


Nor does a state law meet the “related to” test for FAAAA preemption just because it shifts incentives and makes it more costly for motor carriers to choose some routes or services relative to others, leading the carriers to reallocate resources or make different business decisions . . .


. . . In short, even if state laws increase or change a motor carrier's operating costs, “broad law[s] applying to hundreds of different industries” with no other “forbidden connection with prices[, routes,] and services”—that is, those that do not directly or indirectly mandate, prohibit, or otherwise regulate certain prices, routes, or services—are not preempted by the FAAAA. (emphases supplied)

The argument CTA seems to be making is that the independent contractor model is not merely a cost-saving aspect of the trucking industry but is, rather, essential to it and therefore not “several steps removed from prices, routes, or services.” Moving down the slippery slope, the implicit argument is that the ABC classification will cause carriers to exit the market. (But the proponent of preemption defense usually has the burden of proving its applicability—so it is not clear to me how receptive will be to a mere assertion of horribles). In other words, this argument has limits, and it is worth noting that the Third Circuit expressly rejected it very recently in Bedoya v. American Eagle Express, Inc., 914 F.3d 812 (3rd Cir. 2019) (cert denied)—see pp. 23, 24 in this linked slip opinion. The U.S. Supreme Court in a 2013 FAAAA opinion, Dan’s City Used Cars, Inc. v. Pelkey, 569 U.S. 251, stated,

. . . the breadth of the words “related to” does not mean the sky is the limit. We have refused to read the preemption clause of the Employee Retirement Income Security Act of 1974 . . . which supersedes state laws “relate[d] to any employee benefit plan,” with an “uncritical literalism,” else “for all practical purposes pre-emption would never run its course.” . . . And we have cautioned that [the FAAA preemption provision] does not preempt state laws affecting carrier prices, routes, and services “in only a ‘tenuous, remote, or peripheral . . . manner.’”

At the end of the day that is the question: how “remote” is “intrastate-ABC worker law” to carrier prices, routes, and services when taking due regard of a state’s traditional police powers?

Michael C. Duff


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