The Trucking Industry Lost a Case to California Regulators

The Trucking Industry Lost a Case to California Regulators

The trucking industry lost a decision to California regulators in the battle over whether independent owner-operators need to be considered full-time employees. Without any comment, the U.S. Supreme Court chose to not review a decision handed down in September 2018 by the United States Court of Appeals for the Ninth Circuit.

The California Trucking Association (CTA) brought the case against Julie Su, the former Labor Commissioner of the California Department of Industrial Relations. Su is currently serving in the new administration of Governor Gavin Newsom, as the Secretary of Labor.

Driver status in conflict with federal law

The lawsuit and the decision of the Supreme Court were dealt with a federalism question and whether states could apply their rules to the question of driver status in possible conflict with federal law. At the same time, the decision did not specifically rule on questions of whether independent owner-operators should be considered full-time employees.

An attorney for the California Department of Industrial Relations, Miles Locker, stated that in the last six to seven years there has been a “tremendous upsurge” in the number of wage claims filed before the Labor Commission and that most of them deal with drayage drivers out of the Port of Los Angeles and Long Beach.

An attorney, who argued the case in front of the federal courts in California, said the drivers have prevailed in almost 450 cases in front of the commission over the past several years and have a success rate of about 97 percent.

According to Locker, the traditional questions at issue were if driver compensation is at the level of minimum wage and whether the reimbursement of costs is adequate. For several years, all sorts of legal and political venues, including the Industrial Relations’ labor commission were at the center of the battle between companies and drayage drivers.

The Borello standard

According to the Circuit Court decision, the Borello standard is the guidelines that have been used by the commission to determine whether a driver falls under the legal definition of an employee. According to the decision, A principle of Borello is “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.”

However, the Borello standard is a state precedent. Back in 2016, In a Transportation Brief published when the original suit was filed, the law firm which represented CTA – the law firm of Scopelitis, Garvin, Light, Hansen & Feary – said that the Federal Aviation Administration Authorization Act (better known as F4A) “preempted the use of any state law claims that would impact the manner in which motor carriers provide service.”

An attorney Miles Locker stated his viewpoint about the filed suit. And he put it in very simple words. “The labor commissioner is required to simply follow whatever the contract says. That’s the end of the analysis.”

A Scopelitis partner who led the case for the CTA, Adam Smedstad explained the industry’s legal stance which represents a state unabashedly interfering with private contracts between owner-operators and their carriers. He added that the decision involves the legal rights of the state and concluded that he does not view the circuit decision having any implications on the outcome of the misclassification lawsuits.

The court’s rejection – two sides of the story

Locker commented on the decision of the Supreme Court rejection by saying that it will “not stop the states from applying state law as to whether an employee in an independent contractor”. According to him, the view of the state is that the F4A keeps states out of business of regulating “prices, routes or services”.

The Ninth Circuit Court, which covers the westernmost states in the nation, made a decision in which was said that the F4A does not preempt the “Commissioner from using the Borello standard with respect to motor carriers because this generally applicable common law test is not ‘related to’ motor carriers’ prices, routes or services.” The decision appealed by the CTA was not reviewed by the Supreme Court.

The Supreme Court decision not to review the lower court ruling was commented by the former Labor Commissioner of the California Department of Industrial Relations. Julie Su issued a statement saying efforts of the Supreme Court focused on “wage theft”.

“Over the last eight years, the Labor Commissioner’s Office has awarded millions of dollars to truck drivers to help them recoup wages stolen from them through minimum wage and overtime violations,” she said in the prepared statement. “We are committed to protecting drivers who are retaliated against for asserting their rights and will continue to adjudicate wage claims to ensure workers are paid all wages and benefits owed,” Su finished.

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