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Contemporary Federal Preemption in Trucking

Interstate long-haul trucking requires carriers to be aware of, and comply with, state regulatory schemes covering a multitude of issues.  Avoiding a patchwork of conflicting laws is critical in the long-haul trucking arena, where carriers and drivers may need to comply with varying state regulations on an hour-by-hour basis. As such, the trucking industry regularly engages in litigation to quell state efforts to regulate a wide range of workplace standards, including whether a carrier can classify a worker as an independent contractor, and rules for meal and rest breaks.  When federal regulations occupy a certain area, a common conduit for legal challenges to state regulations in those same areas is preemption.

Ostensibly, when state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution.  Preemption applies regardless of whether the conflicting laws come from legislatures, courts, administrative agencies, or constitutions and is intended to avoid a patchwork of state service-determining laws, rules, and regulations.  However, the reality is that charges of preemption are frequently complex and hotly contested.  In recent years, state and local authorities have been pushing stricter rules related to what legislators characterize as worker protection laws.  Here are a few trucking industry related conflicts we’ve been watching:

In California, state legislators are seeking to make it more difficult for carriers to classify their drivers as independent contractors.  As you would anticipate, extending employee status to additional workers would avail those workers to additional protections, coming at additional cost to carriers.  California’s new law (Assembly Bill 5), would be a major impediment to carriers who rely on independent owner-operators to facilitate their business.  In essence, the new law codifies and expands upon the California Supreme Court’s decision in the case of Dynamex Operations West, Inc. v. Superior Court, wherein the Court held that there is a presumption that individuals are employees, and that a business classifying workers as independent contractors bears the burden of establishing that classification is proper under what is known as the “ABC test.”[1]  While the Dynamex decision only covered state wage orders (governing overtime and meal/rest breaks), CA Assembly Bill 5 expands into the realm of workers’ compensation, disability and unemployment insurance, sick leave and other benefits programs.  Absent successful legal intervention grounded in federal preemption, the new law may signify the end of the owner-operator in California. (For more information on the Dynamex decision, see our previous article here.)

Another hot-button item arising out of California is whether state meal and rest rules are preempted by federal law and thus, cannot be enforced against long-haul carriers.  State officials, labor unions and truck drivers sought judicial review to overturn the U.S. Department of Transportation’s 2018 determination that California’s meal and rest rules were preempted by federal law.[2]  Industry advocates opine that compliance with state rules would have a detrimental impact on trucking companies, delaying response times and increasing the cost of transporting goods within the state.  Those costs would be pushed down to consumers.  On the flip side of the coin, the state, the Teamsters and drivers see the DOT’s determination as undermining California’s worker protection laws.  As of the date of this article, the parties are still briefing their respective positions for the Ninth Circuit.

Finally, in April, 2019, parcel hauler American Eagle Express, Inc. petitioned the U.S. Supreme Court to review the Third Circuit’s January, 2019 holding that federal law limiting state regulation of the trucking industry does not preempt New Jersey’s rules for distinguishing between employees and independent contractors.[3]  In summary, the Third Circuit found that New Jersey’s version of the ABC test applied to all businesses, not just trucking, and thus was not subject to federal preemption.  The Court found no clear indication that Congress had intended to preempt state wage laws.  Consequently, American Eagle delivery drivers, who had previously been classified as independent contractors, gained employee status under the law.  In its petition to the Supreme Court, American Eagle argued that the Third Circuit’s finding was contrary to applicable legal precedent and further fractured the circuit split on the issue.  However, in October, the Supreme Court declined to review the case.

Please feel free to contact Benjamin Dill at bdill@setlifflaw.com (804-377-1272) or Steve Setliff at ssetliff@setlifflaw.com (804-377-1261) with any questions you may have regarding conflicts between state and federal laws.

[1] To meet this burden, the hiring entity must establish each of the following three factors, commonly known as the “ABC test”:

(A) that the worker 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; and

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

[2] Int’l Bhd. of Teamsters, Local 2785 v. Fed. Motor Carrier Safety Admin., Nos. 18-73488, 19-70323, 19-70329, 19-70413, 2019 U.S. App. LEXIS 16176 (9th Cir. May 30, 2019).

[3] SeeBedoya v. Am. Eagle Express, 914 F.3d 812 (3d Cir. 2019)