On June 30 of this year, the United States Supreme Court denied a petition for writ of certiorari filed by the California Trucking Association (CTA) in the long-running case of California Trucking Association, Inc. v. Rob Bonta, Attorney General of California. The case is a challenge to the application of Assembly Bill 5 (Gonzalez) and its progeny to independent owner-operator truckers. The challenge was based on the assertion that the Federal Aviation Administration Authorization Act (F4A) preempted application of AB 5 to these individuals. The United States District Court agreed, and the application of AB 5 was enjoined. The United States Court of Appeals for the Ninth Circuit disagreed but stayed the lifting of the injunction until disposition of the CTA’s writ at the United States Supreme Court. When the Court denied the petition, the stay on the injunction was lifted and the owner-operators become subject to the “ABC Test” as embodied in AB 5 as subsequently and oftentimes amended.
Well, that clears that up, does it not? What happened next was, for lack of a better term, a chorus of crickets. The CTA and others sought relief from Governor Newsom. The Governor, and the unions supporting the application of AB 5 to owner-operators, were not particularly interested in talking about the issue and noted the long-running litigation now resolved should put the CTA and its members on notice they need to start complying. But, in essence, noting has happened. Given the penchant for press releases from the Division of Labor Standards Enforcement (DLSE), one might have assumed that they would have gone into full-scale enforcement mode. Maybe that is happening, but if it is it is not getting much attention.
On October 3, the Workers’ Compensation Insurance Rating Bureau (WCIRB) sent out a reminder that because the injunction in the CTA v. Bonta case was lifted, “motor carriers doing business in California are subject to AB 5 for purposes of workers’ compensation. As an outcome of the application of AB 5, workers previously considered to be independent contractors, and thus not covered under an employer’s workers’ compensation policy, may be considered employees and thus subject to the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP) provisions regarding the determination and classification of reportable payrolls.”
For the time being, this brings clarity, at least for workers’ compensation insurance purposes, to this latest vexation emanating from AB 5. But there is more to consider.
First, consider the ongoing litigation in the CTA v. Bonta suit. Wait, you might ask, after the Supreme Court’s denial of review, what is left to discuss? Plenty. Remember that the CTA was arguing AB 5 was preempted by the F4A. But what about whether AB 5 infringes on interstate commerce and as such is unconstitutional? Enter the Owner-Operator Independent Drivers Association (OOIDA). Early on, the OOIDA moved to intervene in this case. But the CTA was presenting issues that did not directly impact interstate commerce. So, once the Supreme Court denied certiorari on that issue, the OOIDA says, essentially, wait a minute – since our members are engaged in interstate commerce, we should have a say on this issue, too. The District Court agreed and allowed OOIDA to intervene on September 22.
The upshot of all this is, per the Court in an Order dated October 12, “Owner-Operator Independent Drivers Association (‘OOIDA’) shall file any renewed or new motions for preliminary injunction by December 7, 2022.”
Well, maybe that will get the Governor and Legislature to pay attention and deal with this issue definitively in 2023. Maybe. But if another injunction is issued then underwriters of this business will have to hit the rewind button fairly soon thereafter.
Note: The opinions expressed herein may or may not be those of Workers’ Comp Executive. Mark Webb is a former Arizona insurance regulator, insurance company chief compliance officer, and is an expert in corporate governance, risk and compliance. He is the owner of Prop 23 Advisors.