California Wins Federal Court Challenge To Controversial Labor Law

Earlier this month, the U.S. Court of Appeals for the Ninth Circuit rejected a challenge brought by several businesses and trade associations to a California law, AB 5, that set a new and complicated test for organizations to determine whether their independent contractors should, in fact, be classified as employees. As Connecting the Dots reported earlier this year, instead of helping workers as it was intended to do, this law has reduced the number of self-employed individuals in California and has led to a decline in overall employment.

Specifically, a report from the Mercatus Center found the California law led to:

• A 4.4 percent decline in overall employment;
• A 10 percent decline in self-employed workers; and
• No increase in the number of traditional employees.

The AB 5 test states that an independent contractors should be classified as an employee unless that contractor meets each of the following criteria:

• The organization does not control or direct what the individual does, either by contract or in actual practice;
• The individual performs tasks that do not fall within the organization’s usual course of business; and
• The individual is engaged in an independently established trade, occupation, or business.

The California Trucking Association and the Owner-Operator Independent Drivers Association (OOIDA) were two of the trade associations that challenged AB 5. “The California Trucking Association and OOIDA have argued that AB5 imposes undue burdens on interstate commerce in violation of the dormant Commerce Clause,” OOIDA said in a statement to The Trucker. “In addition, OOIDA and the state trucking group have said that the law’s decisions on who it exempts violate the U.S. and California constitutions’ equal protection clauses.”

This case could be appealed to the Supreme Court of the United States. Stay tuned to Connecting the Dots for updates.