Sliding in on the coattails of California’s September passage of a law that has undercut leased owner-operators’ ability to work in the state, New Jersey has introduced eerily similar legislation in its Congress. Like California’s A.B. 5, New Jersey’s S. 4204 would restrict businesses’ ability to use independent contractors and in effect block trucking companies from contracting with owner-operators.
However, and also like California’s law, legal challenges would likely mount, should the bill prevail. In that case, the ultimate stop for such lawsuits could be the U.S. Supreme Court, which could have the final say as to whether the restrictive contractor test laws will remain in place.
Bob Roginson, a partner at the law firm Ogletree, Deakins, Nash, Smoak & Stewart, says New Jersey’s law is nearly identical to California’s. Roginson is representing the California Trucking Association and two independent owner-operators in their lawsuit against California’s A.B. 5. That lawsuit is currently at the Ninth Circuit Court of Appeals — a federal appellate court a step below the U.S. Supreme Court.
The lawsuit directly targets the so-called ABC test — the core of A.B. 5. The law states that, for a worker to be classified as an independent contractor, they must meet three requirements (hence the “ABC test” name). CTA’s lawsuit seeks to have courts deem the ABC test invalid for determining whether a trucker should be classified as an independent contractor or an employee.
The crux of A.B. 5, for trucking, is that the B portion of the test prohibits employers from striking agreements with independent contractors in the same line of business as the employer, effectively invalidating trucking company lease agreements with owner-operator independent contractors. Carriers have begun cutting ties with owner-operators who live in California, in some cases offering to transition them to company driver or offering them the chance to move out of state and continue leasing on.
New Jersey’s S. 4204 intends to enact the same ABC test as the state’s go-to for determining worker classification across industries. If challenged via the courts, a subsequent lawsuit could make its way to the Third Circuit Court of Appeals.
“I think it’s clearly setting up for a likely split,” Roginson says of the potential circuit court decisions. He feels the Ninth Circuit will side with him and his plaintiffs (CTA and the two owner-operators) in their case in California. He bases that on standing Ninth Circuit decisions, which have deemed the more nuanced “Borello” test as the proper test for determining whether a truck driver is a company employee or an independent contractor. Borello “was held by the 9th Circuit as to not be pre-empted so long as it’s fairly enforced. And that’s where we would like to get back to,” Roginson says.
Whether either circuit will side with or against the use of ABC tests in trucking is unclear, and decisions are likely years off. But if the rulings are split one for and one against, the issue would then be ripe for the nation’s high court, says Roginson. Split circuit court decisions “normally would mean the U.S. Supreme Court would weigh in and resolve any lingering disputes,” he says.
That may be best long-term, he says, to have the issue “confirmed and clarified” by the Supreme Court, one way or the other.
Obviously, a Supreme Court ruling in favor of the restrictive ABC test would be a disaster for the common leased owner-operator set-up, and potentially damaging for some independents, too. On the flip side, a ruling by the Supreme Court against ABC test laws could be a major win for leased owner-operators and fleets that contract with them. In that case, the Supreme Court would make clear that any state-level laws requiring ABC tests to determine independent contractor status are not applicable to motor carriers and owner-operators they work with.