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Supreme Court Declines To Review California Case With Possible Driver Classification Impact

Supreme Court Declines To Review California Case With Possible Driver Classification Impact


The battle over whether independent owner-operators need to be considered full-time employees saw the trucking industry lose a decision earlier this week to California regulators.

The U.S. Supreme Court, without comment, chose to not review a decision handed down in September 2018 by the United States Court of Appeals for the Ninth Circuit, which covers the western-most states of the nation. That case was brought by the California Trucking Association (CTA) against Julie Su, the former Labor Commissioner of the California Department of Industrial Relations. She is now the Secretary of Labor in the new administration of Governor Gavin Newsom.

The decision that the high court chose not to review did not specifically rule on questions of whether independent owner-operators should be considered full-time employees. Instead, the lawsuit and the decision dealt with a federalism question and whether states could apply their rules to the question of driver status in possible conflict with federal law.

Miles Locker, an attorney for the California Department of Industrial Relations who argued the case in front of the federal courts in California, told FreightWaves 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. That battle between companies and drayage drivers has been playing out in all sorts of legal and political venues for several years, including the Industrial Relations' labor commission. At issue, according to Locker, have been traditional questions of whether driver compensation is at the level of minimum wage and whether the reimbursement of costs is adequate.

Locker 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. (He noted that the figure quoted does not include cases that went to the court system rather than the commission's administrative process.)

The guidelines that have been used by the commission to determine whether a driver falls under the legal definition of employee, according to the Circuit Court decision, is the Borello standard, handed down in a decision almost 30 years ago. A principle of Borello, according to the decision, is "whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired."

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

Or as Locker described it, the CTA "said under the F4A, the labor commissioner is required to simply follow whatever the contract says. That's the end of the analysis."

Adam Smedstad, a Scopelitis partner who led the case for the CTA, had a different interpretation of the industry's legal stance. "This represents a state unabashedly interfering with private contracts between owner operators and their carriers with respect to the transportation of property," he said. The state's involvement "is in complete disregard of the arrangements that were reached (between the two parties)"

The decision involves the legal rights of the state, he added, "and I don't view the circuit decision as having any implications on the outcome of the misclassification lawsuits."

Locker said the decision back in September and the Supreme Court's rejection of an appeal has "tremendous implications for all of the pending court cases." But he appeared to agree with Smedstad that the decision doesn't set a new standard for determining whether an independent driver is an employee. What it does, he said, is "not stop the states from applying state law as to whether an employee is an independent contractor," he said.

The view of the state, according to Locker, is that the F4A keeps states out of the business of regulating "prices, routes or services." Since that was not the intention of the commission, Borello standards could be applied, Locker said.

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 Circuit Court decision said. That was the decision appealed by the CTA and which the Supreme Court chose not to review.

Su did issue a statement on the Supreme Court decision not to review the lower court ruling, saying its efforts had 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."

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