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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

February 23, 2021

Transportation Annual Year in Review: 2021

Truck drivers are concerned about the possibility of a future in which their services are increasingly not needed—and they have been for some time. There were predictions that, by now, large percentages of commercial and other vehicles would be operating automatically.

What sounds like a nightmare for some may be nirvana for others: there have been reports suggesting that transportation network companies’ long-range profitability will depend on advances in autonomous vehicle technology. The change, though, may not be around the corner. A November 2020 report by the MIT Task Force on the Work of the Future concludes that the dystopian vision for workers of a jobless future is not upon us. The report suggests that the process of automation will move slowly over the next decade and beyond, allowing time for current drivers to work until retirement and offering the opportunity to train younger drivers to handle new positions that will open up—including the monitoring of mobile fleets. So the future is coming, just not right away. The report does highlight the “great divergence,” in which wages for working class Americans have stagnated. Truck drivers are among those struggling, but as has been described elsewhere, trucking companies, which generally operate on the thinnest of margins, are not the ones pocketing the large gains of productivity. Those gains are going to a relatively small number of society’s most affluent, abetting the growing inequality which has been stirring social unrest and political antagonism.

A major stress point for both trucking companies and drivers is the employment status of owner-operators. This issue is highly contentious—it’s in a literal legal muddle as the US Department of Labor, the California legislature, and federal and state courts engage in an ongoing battle of wits and wills. California Governor Gavin Newsom signed Assembly Bill 5 (AB-5) into law in late 2019; the bill was initially intended to create employment status for drivers of Uber, Lyft and other app-based transportation entities. It immediately created a great deal of angst among business owners, though, and, in a suit filed by the California Truckers Association in federal court, was subject to serious litigation even before its effective date.

The federal court suspended the enforcement of AB-5 with respect to truck drivers, and the matter is now with the Ninth Circuit Court of Appeals. In the meantime, a state court action on the same basic issue was recently resolved in favor of enforcement. People v. Superior Court, 57 Cal. App. 5th 619. That line dividing federal and state precedent is likely to extend the uncertainty surrounding this issue. In response to the initial backlash regarding AB-5 the legislature, in AB 2257, set out a long list of businesses exempt from AB-5 (not truckers, to be sure), which was signed into law effective September 4, 2020. Two months later, on election day, California voters approved Proposition 22, a ballot initiative sponsored by app-based transportation and delivery companies, essentially overriding AB-5 with respect to drivers for those companies.

In other words, AB-5—and its “ABC test,” which is viewed as worker-friendly—no longer applies to precisely the drivers it was intended to protect. AB-5, once viewed as the vanguard of a national movement; is currently a giant question mark. And that’s not all; in the final weeks of the Trump administration, the Department of Labor announced a final rule articulating the difference between employees and independent contractors for purposes of The Fair Labor Standards Act. The new rule, centered on the economic reality test (also referred to in Section 7 of this review), looks primarily to the measure of control exercised by the employer over the work, and the worker’s opportunity for profit or loss based on initiative and investment. Many observers, though, expect the Biden administration to review and possibly revise or reverse the new rule. In short, the issue of driver classification (or misclassification) will continue to receive much legislative and judicial attention.

Barclay Damon’s Transportation Team is pleased to present its annual summary of cases and statutory and regulatory developments relating to trucking and other transportation industries. A few general observations occur to us: First, most of the new decisions that we discuss are “unreported, ” meaning that the judge deciding the case opted not to have it published in the official reporter volumes. This reduces—and in some states eliminates—the case’s usefulness as precedent.

Another trend in certain parts of the country—district courts in the Fourth Circuit Court of Appeals come to mind, in light of the Transguard decision discussed last year and updated in this year’s edition—is that courts are using their discretion to dismiss declaratory judgment actions filed by insurers. It is undeniably important that the declaratory action be pleaded in such a way as to avoid having the court rule on issues better handled in the tort action. A blanket rule, though, pushing declaratory judgment actions off until the jury has resolved the tort action takes away one of the tactics by which insurers can bring pressure to bear on plaintiffs; many plaintiff attorneys also prefer to try the declaratory action in order to confirm coverage before putting on their tort case.

We will continue to monitor that trend and the others noted in the sections that follow. As always, we look forward to hearing back from you.

Read more here.

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