Metropolitan News-Enterprise


Tuesday, July 29, 2014


Page 1


Trucking Companies Subject to State Labor Laws, S.C. Rules

Justices Unanimously Reject Claim That Regulations Are Preempted by Federal Statute




A federal statute that largely deregulates the transportation industry does not bar California from enforcing its labor and unemployment compensation laws against an interstate motor carrier, the state Supreme Court unanimously ruled yesterday.

The justices affirmed a ruling by this district’s Court of Appeal allowing Attorney General Kamala Harris to proceed with an Unfair Competition Law suit against Long Beach-based PAC Anchor Transportation, Inc.

The attorney general sued PAC Anchor in 2008, saying the company had misclassified its drivers as independent contractors, rather than employees, and thus deprived them of their rights under the unemployment compensation, workers’ compensation, minimum wage, and other statutes, all to the disadvantage of the workers, as well as PAC Anchor’s competitors.

In 2009, Los Angeles Superior Court Judge Elizabeth White granted judgment on the pleadings, saying the action was preempted by the Federal Aviation Administration Authorization Act of 1994, which bars the states from regulating the “price, route, or service” of any motor carrier.

White reasoned that the regulations the state wants to enforce relate to prices, routes, or service; that requiring drivers to be treated as employees would increase costs and thus prices, and that the action could disrupt the market by discouraging independent contractors from competing in the market.

The Court of Appeal, however, said that traditional labor regulation does not relate to goods, prices, or services within the meaning of the FAAAA and that Congress had no intention of preempting such regulation when it passed the act.

Chin’s Opinion

Justice Ming Chin, writing yesterday for the high court, agreed with the Court of Appeal. The FAAAA does not preempt a UCL action based on labor regulations, either on its face or as applied to PAC Anchor, the jurist said.

A number of states, he noted, had unfair competition or deceptive practices statutes in place when the FAAAA was passed, and there was no indication that Congress intended to preempt those laws, he said. He cited Dan’s City Used Cars, Inc. v. Pelkey (2013) 133 S.Ct. 1769, which held that the FAAAA did not preempt the New Hampshire Consumer Protection Act, in an action to recover damages from a defendant who towed the plaintiff’s car and traded it to a third party without compensating the plaintiff. 

Earlier Case

In an earlier case cited by the justice, Californians for Safe Dump Truck Transp. v. Mendonca (9th Cir. 1998) 152 F.3d 1184, the court held that the FAAAA did not preempt the California prevailing wage law as applied to a trucking company. Both Dan’s City and Mendonca, Chin noted, cited earlier cases rejecting claims that state labor laws were preempted by the Employee Retirement Income Security Act.

The justice wrote:

Dan’s City emphasized the FAAAA limiting phrase ‘with respect to the transportation of property,’ which strongly supports a finding that California labor and insurance laws and regulations of general applicability are not preempted as applied under the FAAAA, even if they form the basis of the People’s UCL action....The laws invoked here apply to all employers, not just trucking companies.”

Nor, Chin said, would application of the UCL to this case threaten the “deregulatory purpose” of the FAAAA.

“Congress passed the FAAAA in order to end a patchwork of state regulations,” Chin acknowledged. “However, nothing in the congressional record establishes that Congress intended to preempt states’ ability to tax motor carriers, to enforce labor and wage standards, or to exempt motor carriers from generally applicable insurance laws.”

The justice rejected the defendant’s claim that allowing UCL actions of this type conflicts with congressional intent to facilitate competition in the trucking industry by allowing the use of independent contractors.

The argument is “factually incorrect,” Chin said, because “the People’s UCL action does not encourage employers to use employee drivers rather than independent contractors.” PAC Anchor, he said, remains “free to use independent contractors as long as they are properly classified.”

People ex. rel. Harris v. PAC Anchor Transportation, Inc., 14 S.O.S. 3912.


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