Court Opinion

ID: 4362696
Source: CourtListenerOpinion
Date Created: 2019-01-29 18:00:18.263523+00
Date Added: 2024-06-11T11:49:30.456560
License: Public Domain

PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                 _____________

                      No. 18-1641
                     _____________

  EVER BEDOYA; DIEGO GONZALES; MANUEL
                     DECASTRO,
 on behalf of themselves and all others similarly situated

                            v.

AMERICAN EAGLE EXPRESS INC, d/b/a AEX GROUP

                            v.

   KV SERVICE, LLC; M&J EXPRESS, LLC; A&D
          DELIVERY EXPRESS, LLC

                        American Eagle Express, Inc.,
                                          Appellant
                    ______________

      Appeal from the United States District Court
             for the District of New Jersey
               (D.C. No. 2-14-cv-02811)
          District Judge: Hon. Esther Salas
                    ______________
                Argued November 14, 2018
                    ______________

   Before: GREENAWAY, JR., SHWARTZ, and BIBAS,
                  Circuit Judges.

             (Opinion Filed: January 29, 2019)

Harold L. Lichten          [ARGUED]
Lichten & Liss-Riordan
729 Boylston Street
Suite 2000
Boston, MA 02116

R. Andrew Santillo
Peter D. Winebrake
Winebrake & Santillo
715 Twinning Road
Suite 211, Twinning Office Center
Dresher, PA 19025

      Counsel for Plaintiff-Appellees

Joseph C. DeBlasio         [ARGUED]
Jackson Lewis
220 Headquarters Plaza
East Tower, 7th Floor
Morristown, NJ 07960

      Counsel for Defendant-Appellant

Adina H. Rosenbaum
Public Citizen Litigation Group

                             2
1600 20th Street, NW.
Washington, DC 20009

      Counsel for Amicus Public Citizen Inc.

Christopher W. Weber       [ARGUED]
Emily M. Bisnauth
Office of Attorney General of New Jersey
Department of Law & Public Safety
Richard J. Hughes Justice Complex
25 Market Street
P.O. Box 112
Trenton, NJ 08625

      Counsel for Amicus New Jersey Department of Labor
      and Workforce Development

                        ___________

                         OPINION
                        ___________

SHWARTZ, Circuit Judge.

       Plaintiff delivery drivers Ever Bedoya, Diego Gonzalez,
and Manuel Decastro (collectively, “the Drivers”) filed a
putative class action against Defendant American Eagle
Express, Inc., (“AEX”), alleging that AEX misclassified them
as independent contractors when they are actually employees
under the New Jersey Wage and Hour Law (“NJWHL”), N.J.

                              3
Stat. Ann. §§ 34:11-56a to -56a3, and the New Jersey Wage
Payment Law (“NJWPL”), N.J. Stat. Ann. §§ 34:11-4.1 to -
4:14. AEX moved for judgment on the pleadings pursuant to
Fed. R. Civ. P. 12(c), arguing that the Drivers’ claims are
preempted by the Federal Aviation Authorization
Administration Act of 1994 (“FAAAA”), 49 U.S.C. §§ 14501-
06. The District Court denied AEX’s motion and certified the
order for interlocutory appeal. Because the FAAAA does not
preempt the New Jersey law for determining employment
status for the purposes of NJWHL and NJWPL, we will affirm
the order and remand for further proceedings.

                               I

        AEX is a logistics company that provides delivery
services to various medical organizations. The Drivers are
New Jersey residents who make deliveries for AEX. The
Drivers filed this putative class action against AEX seeking,
among other things, a judgment declaring that they are
employees of AEX, rather than independent contractors, which
entitles them to compensation under the NJWHL and NJWPL.1
AEX moved for judgment on the pleadings, arguing that the
FAAAA preempts the Drivers’ claims.

       The District Court denied AEX’s motion, Bedoya v.
Am. Eagle Express, Civ. No. 14-2811, 2017 WL 4330351, at
*1 (D.N.J. Sept. 29, 2017), reasoning that “[t]here is no clear
indication” that Congress intended for the FAAAA to preempt
state wage laws, Dkt. 109 at 6, 10, and that the connection
between regulation of AEX’s workforce and the “prices,

      1
         The District Court has jurisdiction pursuant to 28
U.S.C. § 1332(d).

                              4
routes, and services” provided to its consumers is too
attenuated to justify preempting claims under the NJWHL and
NJWPL, id. at 8-9. We now consider AEX’s interlocutory
appeal of the order denying the motion pursuant to 28 U.S.C.
§ 1292(b). Bedoya, 2017 WL 4330351, at *1-4.

                              II2

                              A

       The question before us is whether the FAAAA preempts
New Jersey’s test for determining employment classification
for purposes of the NJWHL and NJWPL. Under this test,
workers performing services for a given company in exchange
for pay are deemed employees unless the company can
demonstrate each of the following:

      A. Such individual has been and will continue to
         be free from control or direction over the

      2
        We review an order granting or denying a motion for
judgment on the pleadings de novo. Zimmerman v. Corbett,
873 F.3d 414, 417 (3d Cir. 2017) (citing Allah v. Al-Hafeez,
226 F.3d 247, 249 (3d Cir. 2007)). Judgment will not be
granted unless the movant “clearly establishes there are no
material issues of fact, and he is entitled to judgment as a
matter of law.” Sikirica v. Nationwide Ins. Co., 416 F.3d 214,
220 (3d Cir. 2005) (citation omitted). In considering a motion
for judgment on the pleadings, we must accept as true all facts
presented in the complaint and answer and draw all reasonable
inferences in favor of the non-moving party—here, the
Drivers. Id. at 417-18. While AEX implores us to look beyond
the pleadings, we may not.

                              5
          performance of such service, both under his
          contract of service and in fact; and

       B. Such service is either outside the usual course
          of the business for which such service is
          performed, or that such service is performed
          outside of all the places of business of the
          enterprise for which such service is
          performed; and

       C. Such individual is customarily engaged in an
          independently established trade, occupation,
          profession, or business.

N.J. Stat. Ann. §§ 43:21-19(i)(6)(A)-(C) (“New Jersey ABC
classification test”).    Where a company successfully
demonstrates all three elements with respect to a worker, that
worker qualifies as an independent contractor under the
NJWHL and NJWPL. Hargrove v. Sleepy’s, LLC, 106 A.3d
449, 458 (N.J. 2015). The company, in turn, is exempt from
requirements under those statutes with respect to the worker.
Id. For individuals classified as employees, however, the
employing company is subject to each statute’s obligations,
including minimum and overtime wage requirements, N.J.
Stat. Ann. § 34:11-56a4, conditions regarding the time and
mode of pay, N.J. Stat. Ann. § 34:11-4.2, 4.2a, and restrictions
on pay deductions, N.J. Stat. Ann. § 34:11-4.4. AEX contends
that the New Jersey ABC classification test is preempted by the
FAAAA.

                               6
                               B

         The preemption doctrine stems from the Supremacy
Clause, which provides that “the Laws of the United States . . .
shall be the supreme Law of the Land . . . any Thing in the
Constitution or Laws of any State to the Contrary
notwithstanding.” U.S. Const. art. VI, cl. 2. Thus, “Congress
. . . has the power to preempt state law.” In re Vehicle Carrier
Servs. Antitrust Litig., 846 F.3d 71, 83 (3d Cir. 2017) (citing
Arizona v. United States, 567 U.S. 387 (2012)), cert denied sub
nom., Alban v. Nippon Yusen Kabushiki Kaisha, 138 S. Ct.
114 (2017). There are three categories of preemption: field
preemption, conflict preemption, and express preemption.
Holk v. Snapple Beverage Corp., 575 F.3d 329, 334 (3d Cir.
2009) (citing Hillsborough County, Fla. v. Automated Med.
Labs., Inc., 471 U.S. 707, 713 (1985)).

        Because preemption is an affirmative defense, we
examine the specific preemption defense asserted. In re
Vehicle, 846 F.3d at 84 (citing Oneok, Inc. v. Learjet, Inc., 135
S. Ct. 1591 (2015)). AEX argues that New Jersey’s ABC
classification test is subject to express preemption under 49
U.S.C. § 14501(c)(1). “Express preemption requires a[n]
analysis of whether ‘[s]tate action may be foreclosed by
express language in a congressional enactment.’” Lupian v.
Joseph Cory Holdings, LLC, 905 F.3d 127, 131 (3d Cir. 2018)
(alteration in original) (quoting Lorillard Tobacco Co. v.
Reilly, 533 U.S. 525, 541 (2001)).

       In evaluating AEX’s argument, we first decide whether
the presumption against preemption applies. City of Columbus
v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 438
(2002) (applying the presumption against preemption in the

                               7
FAAAA context). Under this presumption, “the historic police
powers of the States” are “not to be superseded by [a] [f]ederal
[a]ct unless that was the clear and manifest purpose of
Congress.” Sikkelee v. Precision Airmotive Corp., 822 F.3d
680, 687 (3d Cir. 2016) (quoting Wyeth v. Levine, 555 U.S.
555, 565 (2009)). Thus, we “presume claims based on laws
embodying state police powers are not preempted.” In re
Vehicle, 846 F.3d at 84; see also Farina v. Nokia Inc., 625 F.3d
97, 116 (3d Cir. 2010).

        Many employment regulations, such as the wage laws
at issue here, seek to ensure workers receive fair pay. Because
they protect workers, they are within New Jersey’s police
power, and the presumption against preemption by federal law
applies. See, e.g., Lupian, 905 F.3d at 131 (stating wage laws
that protect workers represent an exercise of “police power”);
see also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 21
(1987) (applying the presumption against preemption to a state
labor law regarding severance pay “since the establishment of
labor standards falls within the traditional police power of the
State”).

       The presumption is rebutted where Congress had a
“clear and manifest purpose” to preempt state laws. Sikkelee,
822 F.3d at 687 (citation omitted); see also Cipollone v. Liggett
Grp., Inc., 505 U.S. 504, 516 (1992) (directing courts to
examine congressional intent, the “ultimate touchstone” in
discerning the preemptive scope of a statute (internal quotation
marks and citation omitted)). To determine Congress’
purpose, we look to the plain language of the statute and, if
necessary, to the statutory framework as a whole. Medtronic,
Inc. v. Lohr, 518 U.S. 470, 486 (1996) (citation omitted).
Thus, we next examine Congress’ purpose in enacting the

                               8
FAAAA and the Airline Deregulation Act of 1978 (“ADA”),
49 U.S.C. §§ 40101-130, an earlier statute with a similar
preemption provision.

                               C

        In 1978, following a long period of heightened
regulation, Congress enacted the ADA, which sought to
deregulate the air-travel industry to “maxim[ize] reliance on
competitive market forces.” Morales v. Trans World Airlines,
Inc., 504 U.S. 374, 378 (1992) (quoting 49 U.S.C. App. §
1302(a)(4)). To ensure that this objective would not be
frustrated by state regulation, Congress included a preemption
provision providing that “no State . . . shall enact or enforce
any law . . . relating to rates, routes, or services of any air
carrier.” Id. at 420 (Stevens, J., dissenting) (quoting 49 U.S.C.
App. § 1305(a)).

        Congress enacted similar laws focused on deregulating
interstate trucking, culminating with the passage of the
FAAAA in 1994. Lupian, 905 F.3d at 132-33. Via the
FAAAA, Congress sought to “level the playing field” between
air carriers and motor carriers so that both could benefit from
federal deregulation. H.R. Conf. Rep. No. 103-677, at 88
(1994); see also Californians for Safe & Competitive Dump
Truck Transp. v. Mendonca, 152 F.3d 1184, 1187-88 (9th Cir.
1998) (detailing FAAAA legislative history). The FAAAA
contains a preemption provision modeled after the ADA’s,
providing, with limited exceptions, that:

       a State . . . may not enact or enforce a law,
       regulation, or other provision having the force
       and effect of law related to a price, route, or

                               9
       service of any motor carrier . . . with respect to
       the transportation of property.

49 U.S.C. § 14501(c)(1). Because of the parallels between the
ADA and FAAAA, ADA cases are instructive regarding the
scope of FAAAA preemption. See Rowe v. N.H. Motor
Transp. Ass’n, 552 U.S. 364, 370 (2008) (analyzing FAAAA
preemption using ADA cases as guidance). As with the ADA,
the FAAAA preemption provision’s central objective is to
avoid frustrating the statute’s deregulatory purpose by
preventing states from imposing “a patchwork of state service-
determining laws.” Dan’s City Used Cars, Inc. v. Pelkey, 569
U.S. 251, 264 (2013) (quoting Rowe, 552 U.S. at 373). The
FAAAA, however, has a qualifier that is absent from the ADA:
the preempted state law must relate to prices, routes, or services
“with respect to the transportation of property.” 49 U.S.C.
§ 14501(c)(1). The Supreme Court has recognized that this
language “massively limits the scope of preemption ordered by
the FAAAA.” Dan’s City, 569 U.S. at 261 (internal citation
and quotation marks omitted).

        Further insight into the limits of FAAAA preemption
comes from the subjects Congress considered when enacting
that statute. “Congress identified ten jurisdictions (nine states
and the District of Columbia . . . ) that did not regulate intrastate
prices, routes, and services.” Cal. Trucking Ass’n v. Su, 903
F.3d 953, 967 (9th Cir. 2018) (citing Mendonca, 152 F.3d at
1187). By implication, Congress determined that the laws then
in existence in those jurisdictions did not contravene its
deregulatory goals and thus were not preempted. Id.

       The Supreme Court has also articulated several
principles that inform us about the breadth of FAAAA

                                 10
preemption. First, the “related to” language from the FAAAA
preemption clause gives it a broad scope, encompassing any
state actions that have “a connection with, or [make] reference
to . . . rates, routes, or services” of a motor carrier. Nw., Inc.
v. Ginsberg, 572 U.S. 273, 280-81 (2014) (internal quotation
marks and citation omitted) (interpreting the ADA). While this
language covers any state law that has a connection with or
refers to “price[s], route[s], [or] service[s,]” id. at 280, “the
breadth of the words ‘related to’ does not mean the sky is the
limit,” Dan’s City, 569 U.S. at 260. Drawing from case law
examining similar wording in the preemption provision of the
Employee Retirement Income Security Act of 1974, 29 U.S.C.
§ 1144(a), see, e.g., Morales, 504 U.S. at 383-84, the Supreme
Court has observed that reading the phrase “related to” with
“uncritical literalism” would render preemption an endless
exercise, Dan’s City, 569 U.S. at 260-61 (citation omitted),
because “everything [is] relat[ed] to everything else in some
manner[,]” Schwann v. FedEx Ground Package Sys., Inc., 813
F.3d 429, 436 (1st Cir. 2016) (citing N.Y. State Conference of
Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S.
645, 655 (1955)).

       Second, FAAAA preemption reaches laws that affect
prices, routes, or services even if the effect “is only indirect.”
Rowe, 552 U.S. at 370 (quoting Morales, 504 U.S. at 386).
However, where a law’s impact on carrier prices, routes, or
services is so indirect that the law affects them “in only a
tenuous, remote, or peripheral . . . manner,” the law is not
preempted. Dan’s City, 569 U.S. at 261 (quoting Rowe, 552
U.S. at 371); Morales, 504 U.S. at 390 (quoting Shaw v. Delta
Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983)).

                               11
        Finally, preemption occurs where a state law has “a
‘significant impact’ on carrier rates, routes, or services.”3
Rowe, 552 U.S. at 375 (emphasis omitted) (quoting Morales,
504 U.S. at 390).

        Mindful of these principles, we next review the case law
for guidance concerning whether a law has a direct or indirect
effect and whether it has a significant or insignificant effect.
From our review, we identify factors courts examine and set
forth those factors that may shed light on a law’s directness and
those that may reflect the significance of the law’s effect on the
regulated entities at issue.

                                D

        Neither the Supreme Court nor our Court has recited
precise standards for evaluating directness or significance, but
cases addressing the issue provide some guidance. For
example, the Supreme Court has held that consumer protection
and fraud laws used to regulate frequent-flyer programs could
directly and significantly affect prices and services and are thus
preempted. See Am. Airlines, Inc. v. Wolens, 513 U.S. 219,
223 (1995); Morales, 504 U.S. at 388-89. Similarly, the Court
determined that a Maine law requiring a specific procedure to
verify the recipient of tobacco deliveries was preempted by the
FAAAA because it dictated a service that tobacco motor
carriers were required to provide for property they transported.
Rowe, 552 U.S. at 372. In addition, we recently observed that

       3
         The Supreme Court also noted that “it makes no
difference whether a state law is ‘consistent’ or ‘inconsistent’
with federal regulation.” Rowe, 552 U.S. at 370 (quoting
Morales, 504 U.S. at 386-87).

                               12
the FAAAA’s “preemption clause undoubtedly applies, for
example, to state laws directly restricting types of goods that
can be carried by trucks, tariffs, and barriers to entry.” Lupian,
905 F.3d at 135; H.R. Conf. Rep. No. 103-677, at 86 (1994).

        On the other hand, the FAAAA itself, the Supreme
Court, and the courts of appeals have identified laws that are
too “tenuous, remote, or peripheral” from carrier prices, routes,
and services to trigger preemption. See, e.g., Rowe, 552 U.S.
at 371; Dilts v. Penske Logistics, LLC, 769 F.3d 637, 646 (9th
Cir. 2014). The FAAAA explicitly exempts from preemption
laws governing motor vehicle safety, local route controls based
on vehicle size and weight, and driver insurance requirements.4
49 U.S.C. § 14501(c)(2)(A). The Supreme Court has stated
that the FAAAA does not preempt laws prohibiting
prostitution, gambling, and “obscene depictions,” Morales,
504 U.S. at 390, or those addressing zoning, Dan’s City, 569
U.S. at 264. We have observed that “garden variety
employment claim[s]” evade ADA and FAAAA preemption
because they are “too remote and too attenuated” from carrier
prices, services, or routes. Lupian, 905 F.3d at 134 (quoting
Gary v. Air Grp., Inc., 397 F.3d 183, 189 (3d Cir. 2005)). As
relevant to this case, we recently held that wage claims under
the Illinois Wage Payment and Collection Act (“IWPCA”),
820 Ill. Comp. Stat. 115/1-115/15, are not preempted under the
FAAAA because they are “too far removed from the statute’s

       4
          The House of Representatives Conference Report
specifies that the list provided in 49 U.S.C. § 14501(c)(2) and
(3) is “not intended to be all inclusive, but merely to specify
some of the matters which are not ‘prices, rates or services’ and
which are therefore not preempted.” H.R. Conf. Rep. No. 103-
677, at 83.

                               13
purpose to warrant preemption.” Lupian, 905 F.3d at 136.
Many of our sister circuits have similarly held that the FAAAA
and ADA do not preempt state employment laws. See, e.g.,
Allied Concrete & Supply Co. v. Baker, 904 F.3d 1053, 1068
(9th Cir. 2018) (holding California prevailing wage law for
workers on public projects not preempted); Su, 903 F.3d at 957
(holding California common law test for employee versus
independent contractor status not preempted); Costello v.
BeavEx, Inc., 810 F.3d 1045, 1048 (7th Cir. 2016) (holding
Illinois wage law not preempted), cert. denied, 137 S. Ct. 2289
(2017); Amerijet Int’l, Inc. v. Miami-Dade County, Fla., 627
F. App’x 744, 751 (11th Cir. 2015) (holding Miami-Dade
County living wage ordinance as applied to air carriers not
preempted); Dilts, 769 F.3d at 647 (holding California meal
and rest-break laws not preempted); Mendonca, 152 F.3d at
1189 (holding California wage law not preempted).

        From the language of the FAAAA preemption provision
and these cases, we can distill several factors courts should
consider when deciding whether a particular state law is
FAAAA-preempted. First, courts should examine whether the
state law at issue applies to all businesses or whether it focuses
on motor carriers. Laws that are directed at “members of the
general public” and that are not targeted at motor carriers are
usually viewed as not having a direct effect on motor carriers.
Rowe, 552 U.S. at 375.

       Even targeted laws, however, are not necessarily
preempted. We know from the FAAAA itself that state laws
that may target motor carrier safety and insurance, or restrict
local routes based on vehicle size and weight, are not
preempted. 49 U.S.C. § 14501(c)(2). Conversely, laws of
general applicability may nonetheless be preempted where

                               14
they have a significant impact on the services a carrier
provides. See, e.g., DiFiore v. Am. Airlines Inc., 646 F.3d 81,
88-89 (1st Cir. 2011) (holding generally applicable state tip
law as applied to airlines preempted under the ADA because it
“directly regulate[d] how an airline service is performed and
how its price is displayed to customers”). Thus, whether a law
is applicable to every business or targets carriers is a helpful
but nondispositive factor for determining whether a law has a
direct effect on motor carriers’ prices, routes, or services.
Morales, 504 U.S. at 386.

        Second, courts should consider whether the law
addresses the carrier-employee relationship as opposed to the
carrier-customer relationship. “[G]enerally applicable state
laws that affect the carrier’s relationship with its customers
[differ from] those that affect the carrier’s relationship with its
workforce.” Costello, 810 F.3d at 1054; see also Su, 903 F.3d
at 961-63 (noting same dichotomy); DiFiore, 646 F.3d at 88
(preempting a Massachusetts law prohibiting employer from
collecting fee advertised as “service charge” because the law
regulates how a company performs services for its customers
and “not merely how the airline behaves as an employer or
proprietor”).

       The Court of Appeals for the Seventh Circuit provides
a useful analysis explaining why laws governing an employer’s
relationship with its employees have too remote an impact to
be preempted. S.C. Johnson & Son, Inc. v. Transp. Corp. of
Am., Inc., 697 F.3d 544, 558 (7th Cir. 2012) (citing Mendonca,
152 F.3d at 1189). The court examines whether the challenged
state law regulates matters needed to operate the business,
which it calls resource inputs, as opposed to laws governing
the goods or services the business puts out, which it calls

                                15
product outputs. Id. The product outputs of the motor carrier
industry are the services it provides—transportation of
property from origin to destination. Id. The FAAAA’s focus
on prices, routes, and services shows that the statute is
concerned with the industry’s production outputs, and seeks to
protect them from state regulation.

        Resource inputs, on the other hand, are the resources
necessary for a business to create product outputs, including
“labor, capital, and technology,” which may be regulated by
various laws. Id. “For example, labor inputs are affected by a
network of labor laws, including minimum wage laws, worker-
safety laws, anti-discrimination laws, and pension regulations.
Capital is regulated by banking laws, securities rules, and tax
laws, among others. Technology is heavily influenced by
intellectual property laws.” Id. Although laws that regulate
inputs may impact costs and may in turn affect prices charged
and services provided to customers, “no one thinks that the
ADA or the FAAAA preempts these [regulations] and the
many comparable state laws[.]” Id. That is because,
notwithstanding the state laws’ indirect effects, they “operate
one or more steps away from the moment at which the firm
offers its customer[s] a service for a particular price” and
therefore have too “remote” an effect on prices, routes, and
services to be the intended target of preemption. Id. (internal
citations omitted); see also Su, 903 F.3d at 966 (stating that
courts should examine “where in the chain of a motor carrier’s
business [the state law] is acting to compel a certain result (e.g.,
consumer or work force), and what result it is compelling (e.g.,
certain wage, non-discrimination, a specific system of
delivery, a specific person to perform the delivery)”); Costello,
810 F.3d at 1055 (embracing S.C. Johnson, 697 F.3d at 558).
In short, laws regulating labor inputs, such as wage laws, have

                                16
too remote an effect on the price the company charges, the
routes it uses, and service outputs it provides and are less likely
to be preempted by the FAAAA.

        Third, courts should consider whether the law binds the
carrier to provide a particular price, route, or service. As
discussed above, the Supreme Court held that Maine’s
identification requirements for tobacco deliveries required a
motor carrier transporting tobacco to provide a particular
service. Rowe, 552 U.S. at 372. Similarly, the Court of
Appeals for the First Circuit determined that Massachusetts’
ABC test for classifying employees in effect bound the carrier
to provide its services using employees rather than independent
contractors. Schwann, 813 F.3d at 437. Under Massachusetts’
independent contractor statute, only workers who perform a
service that is outside the employer’s usual course of business
may be classified as independent contractors. Id. (quoting
Mass. Gen. Laws ch. 149, § 148B(a)(2)). Thus, application of
Massachusetts’ test “in substance, bar[red] [the carrier at issue]
from using any individuals as full-fledged independent
contractors.” Id. In other words, the Massachusetts test
essentially foreclosed the independent contractor classification
of any of the carrier’s workers performing delivery services
because such services were within the carrier’s usual course of
business. Id. As a result, the Massachusetts statute bound the
carrier to provide its services using employees and not
independent contractors.

        The same was not true with laws that do not dictate a
price, route, or service. For example, the Court of Appeals for
the Ninth Circuit analyzed whether the FAAAA preempted a
California law that requires employers to provide meal and rest
breaks, reviewing, among other factors, whether the law bound

                                17
the carrier to specific prices, routes, or services. Dilts, 769 F.3d
at 649-50. The court held that the FAAAA did not preempt
California’s meal and rest-break laws. Id. The court relied
partially on the fact that the California laws did not “set prices,
mandate or prohibit certain routes, or tell motor carriers what
services they may or may not provide, either directly or
indirectly.” Id. at 647. Put simply, the law at issue did “not
‘bind’ motor carriers to specific prices, routes, or services.”5
Id. (citation omitted).

        Finally, courts examining a preemption challenge to a
state law should be mindful of Congress’ goal of avoiding a
“patchwork” of differing state “service-determining laws,”
which could undermine its “major legislative effort to leave
[decisions regarding the provision of services] to the
competitive marketplace.” Rowe, 552 U.S. at 373 (citing H.R.
Conf. Rep. No. 103-677, at 87 (1994)). This goal does not
constitute a categorical imperative to free motor carriers of all
state regulation. Rather, the plain language of the FAAAA,
and its preemption of only laws “relat[ing] to” carrier “price[s],
route[s], or service[s],” 49 U.S.C. § 14501(c)(1), demonstrates
that Congress was concerned only with a limited set of state

       5
         AEX characterizes Dilts as impermissibly relying on
this “binds to” test to conclude that the FAAAA did not
preempt California’s meal and rest break laws, arguing that
such a test construes the scope of FAAAA preemption too
narrowly. While relying solely on such a “binds to” test may
narrow FAAAA preemption to an unacceptable degree, Dilts
merely recognized that the “binds to” test provides one of
several possible avenues to demonstrate that a state law has a
significant effect on carrier prices, routes, or services. Dilts,
769 F.3d at 649.

                                18
laws. Dilts, 769 F.3d at 646-47. Thus, “[t]he fact that laws
may differ from state to state is not, on its own, cause for
FAAAA preemption.” Id. at 647. Laws that are “more or less
nationally uniform,” Chambers v. RDI Logistics, Inc., 65
N.E.3d 1, 11-12 (Mass. 2016), are less likely to pose the kind
of state law interference FAAAA preemption seeks to avoid.

       In sum, to assess the directness of a law’s effect on
prices, routes, or services, courts should examine whether the
law: (1) mentions a carrier’s prices, routes, or services;
(2) specifically targets carriers as opposed to all businesses;
and (3) addresses the carrier-customer relationship rather than
non-customer-carrier relationships (e.g., carrier-employee). If
a law has a direct impact on carriers’ prices, routes, or services
with respect to the transportation of property, then it is
preempted unless it falls within one of the statutory exceptions.
Though we can draw no firm line between laws whose effects
on rates, routes, or services are indirect and laws whose effects
are “tenuous, remote, or peripheral,” these factors, and perhaps
other considerations, will guide courts in the inquiry.

         To assess whether a law has a significant effect on a
carrier’s prices, routes, or services, courts should consider
whether: (1) the law binds a carrier to provide or not provide a
particular price, route, or service; (2) the carrier has various
avenues to comply with the law; (3) the law creates a
patchwork of regulation that erects barriers to entry, imposes
tariffs, or restricts the goods a carrier is permitted to transport;
and (4) the law existed in one of the jurisdictions Congress
determined lacked laws that regulate intrastate prices, routes,
or services and thus, by implication, is a law Congress found
not to interfere with the FAAAA’s deregulatory goal. Other
factors may also lead a court to decide that a state law has a

                                19
significant effect where the law undermines Congress’ goal of
having competitive market forces dictate prices, routes, or
services of motor carriers.6

                                E

       We have examined each of these considerations and
conclude that New Jersey’s ABC classification test is not
preempted as it has neither a direct, nor an indirect, nor a
significant effect on carrier prices, routes, or services.

       6
          Before the Supreme Court’s rulings in Rowe and
Dan’s City, our Court once framed the inquiry—albeit in the
context of whether a defamation claim was preempted under
the ADA (a question we answered in the negative, holding that
the defamation claim was not preempted)—as whether the law
or claim in question would “frustrate[] deregulation by
interfering with competition through public utility-style
regulation.” Taj Mahal Travel, Inc. v. Delta Airlines, Inc., 164
F.3d 186, 194 (3d Cir. 1998) (citation omitted). Elaborating
on regulation in a “public utility sense” in the context of airline
services, our Court said that regulations of “the frequency and
scheduling of transportation” and “the selection of markets”
are public-utility styled regulations (which would thus be
preempted under the ADA), whereas “provision of in-flight
beverages, personal assistance to passengers, the handling of
luggage, and similar amenities” are not services in a “public
utility sense,” and thus could be regulated, for instance through
state implementation of a duty to exercise reasonable care, the
violation of which could give rise to ordinary tort claims. Id.
at 193 (quoting Charas v. Trans World Airlines, Inc., 160 F.3d
1259, 1261, 1265-66 (9th Cir. 1998) (en banc)).

                                20
        Any effect New Jersey’s ABC classification test has on
prices, routes, or services is tenuous. The test does not mention
carrier prices, routes, or services, nor does it single out carriers.
Indeed, the test applies to all businesses as part of the
“backdrop” they “face in conducting their affairs.” Lupian,
905 F.3d at 136; see also Dilts, 769 F.3d at 646 (describing a
state employment law as a “background regulation[]”). The
test also does not regulate carrier-customer interactions or
other product outputs. Rather, it only concerns employer-
worker relationships. Laws governing how an employer pays
its workers do not “directly regulate[] how [a carrier’s] service
is performed[;]” they merely dictate how a carrier “behaves as
an employer[.]” DiFiore, 646 F.3d at 88. As a result, the test
is “steps removed” from regulating customer-carrier
interactions through prices, routes, or services. Costello, 810
F.3d 1054 (quoting Dilts, 769 F.3d at 646).

       The New Jersey ABC classification test does not have a
significant effect on prices, routes, or services either. The test
does not bind AEX to a particular method of providing services
and thus it is unlike the preempted Massachusetts law at issue
in Schwann, 813 F.3d 429. The Massachusetts statute does not
include New Jersey’s alternative method for reaching
independent contractor status—that is, by demonstrating that
the worker provides services outside of the putative employer’s
“places of business.” N.J. Stat. Ann. § 43:21-19(i)(6)(B).
Thus, if the other prongs of the New Jersey classification test
are met, the test allows an employer to classify a worker as an
independent contractor if it shows that the worker either
provides a service that is “outside the [employer’s] usual
course of business . . . or [performs such service] outside of all

                                 21
the places of business of [the employer].” Id.7 No part of the
New Jersey test categorically prevents carriers from using
independent contractors. As a result, the state law at issue here
does not mandate a particular course of action—e.g., requiring
carriers to use employees rather than independent
contractors—and it offers carriers various options to comply
with New Jersey employment law.8

       7
          AEX focuses its argument on the B prong of the New
Jersey test, but also asserts that the A and C prongs of the test
are preempted. AEX cites no case holding that prong A or C
is preempted under either the FAAAA or the ADA. This is not
surprising given the legion of cases holding that the A and C
prongs are not FAAAA-preempted. See, e.g., Vargas v. Spirit
Delivery & Distrib. Servs., Inc., 245 F. Supp. 3d 268, 281-84
(D. Mass. 2017); DaSilva v. Border Transfer of Mass., Inc.,
227 F. Supp. 3d 154, 159-60 (D. Mass. 2017); Portillo v. Nat’l
Freight, Inc., Civ. No. 15-7908, 2016 WL 5402215, at *5-6
(D.N.J. Sept. 26, 2016); Chambers v. RDI Logistics, Inc., 65
N.E.3d 1, 11-12 (Mass. 2016). AEX also provides no reason
why these prongs are preempted and in fact does not
individually analyze them. Thus, AEX has failed to carry its
burden to demonstrate that the affirmative defense of FAAAA
preemption applies to these prongs.
        8
          AEX makes much of the fact that the Costello and
Lupian courts observed that certain aspects of the IWPCA
classification provision could be contracted around (i.e.,
employees could enter into contracts with carriers to allow
certain paycheck deductions), Lupian, 905 F.3d at 135 n.12,
whereas neither the New Jersey test nor the Massachusetts test
allows the same contractual avoidance. Contrary to AEX’s
argument, this does not make the current case more analogous

                               22
        AEX argues that applying the New Jersey law may
require it to shift its model away from using independent
contractors, which will increase its costs, and in turn, its prices.
Specifically, AEX asserts that if it can no longer use
independent contractors to perform its delivery services, then
it will be forced to recruit employees, bring on a human
resources department to manage them, acquire and maintain a
fleet of vehicles and pay expense reimbursements, provide
fringe benefits, plan and dictate delivery routes and timing, and
pay overtime wages and employment taxes. Our Court and our
sister circuits have rejected similar lists of conclusory impacts.
Lupian, 905 F.3d at 135-36; Costello, 810 F.3d at 1056;
Mendonca, 152 F.3d at 1189. Though AEX correctly states
that it need not proffer empirical evidence to support its
assertions of significant impact at the pleading stage, see, e.g.,
Costello, 810 F.3d at 1055 (citing Rowe, 552 U.S. at 373-74),

to Schwann than to Costello and Lupian. Though Costello and
Lupian correctly took the IWPCA contractual loophole into
account, neither court relied on it. See Lupian, 905 F.3d at 136
n.12 (observing that the Costello court “noted” the contractual
allowance in the IWPCA); Costello, 810 F.3d at 1057 (noting
in a single sentence that the IWPCA’s prohibition on
deductions from wages can be contracted around, ultimately
holding that the IWPCA is not “related to a price, route, or
service of any motor carrier”). Moreover, while a contractual
circumvention option may provide another route for
compliance, weighing against FAAAA preemption, it is not the
only way a state statute can afford carriers some flexibility.
Here, the New Jersey ABC classification test gives carriers
options; it does not need to provide a contractual workaround
to avoid preemption.

                                23
it does not provide even a logical connection between the
application of New Jersey’s ABC classification test and the list
of new costs it would purportedly incur.9

         AEX’s argument that it may be subject to other legal
requirements arising from reclassification, citing only the
Affordable Care Act,10 is equally unavailing. In the words of
the Costello court, “[c]onspicuously absent from [the
company’s] parade of horrors is any citation of authority
showing that it would be required to comply with [other]
federal and state laws.” Id. at 1056. Instead, AEX “rel[ies] on
conclusory allegations that compliance with the [NJWHL and
NJWPL] will require [AEX] to switch its entire business model
. . . [but w]e see no basis for concluding that [New Jersey law]
would require that change given that the federal employment
laws and other state labor laws [may] have different tests” for
determining whether someone is an employee under a specific
statute. Id. (citations omitted).

       Furthermore, while “[w]e have no doubt that the
disruption of a labor model—especially after services have
been performed—could have negative financial and other
consequences for an employer,” Lupian, 905 F.3d at 136, this
impact on the employer does not equate to a significant impact
on Congress’ goal of deregulation. Congress sought to ensure

       9
         For instance, we cannot see, nor has AEX explained,
how reclassification of employees would necessarily require
AEX to acquire a new fleet of vehicles or create a human
resources department.
       10
          Patient Protection and Affordable Care Act of 2010,
Pub. L. No. 111-148, 124 Stat. 119 (2010).

                              24
market forces determined prices, routes, and services. Nothing
in that goal, however, meant to exempt workers from receiving
proper wages, even if the wage laws had an incidental impact
on carrier prices, routes, or services.11

       Finally, the fact that New Jersey’s ABC classification
test differs from the federal test used in the Fair Labor
Standards Act of 1938, 29 U.S.C. §§ 201-19, will not result in
a “‘patchwork’ of unique state legislation, which [AEX
contends] regulates differently from state to state how motor
carriers are required to perform their delivery services.” Reply
Br. at 14. Most notably, New Jersey’s test is similar to that
used in many other states. See, e.g., RDI Logistics, 65 N.E.3d
at 11-12 (holding that prongs A and C of the Massachusetts
test, which are identical to those in the New Jersey test, were
not FAAAA-preempted because they did not present a
“patchwork problem” as they were “more or less nationally
uniform,” unlike the Massachusetts B prong, which was
preempted in Schwann because it was anomalous (quoting
Schwann, 813 F.3d at 440)).

       11
          Indeed, Congress evinced its intent for the FAAAA
not to preempt general state wage laws when it included New
Jersey—where, at the time the FAAAA was enacted, the
NJWHL and NJWPL were already in effect, N.J. Stat. Ann. §§
34:11-56a7 & 34:11-4.1 (indicating initial enactment in 1966
and 1965, respectively)—in its list of jurisdictions with laws
that did not run afoul of the FAAAA. H.R. Conf. Rep. No.
103-677, at 86 (1994); see also Mendonca, 152 F.3d at 1187-
88 & n.3.

                              25
        Thus, AEX has not shown that New Jersey’s ABC
classification test has a “significant impact” on Congress’
deregulatory efforts with respect to motor carrier businesses,
nor are the NJWHL and NJWPL—typical state wage and hour
laws—the kinds of preexisting state regulations with which
Congress was concerned when it passed the FAAAA.12 See
Lupian, 905 F.3d at 135-36; Schwann, 813 F.3d at 438;
Costello, 810 F.3d at 1050-51; Amerijet, 627 F. App’x at 751;
Dilts, 769 F.3d at 647-48; Gary, 397 F.3d at 189-90;
Mendonca, 152 F.3d at 1187-89. Notably, eight of the ten
jurisdictions that Congress identified as not regulating
intrastate prices, routes, and services “had laws for
differentiating between an employee and an independent
contractor,” Su, 903 F.3d at 967, and at least three codified
ABC tests similar to that of New Jersey, see Alaska Stat. §
23.20.525(a)(10) (1992); Del. Code Ann. tit. 19, § 3302(9)(k)
(1992); Vt. Stat. Ann. tit. 21, § 1301(6)(B) (1992). Therefore,
AEX’s patchwork argument fails.

        Accordingly, any effect the New Jersey ABC
classification test has on prices, routes, or services with respect
to the transportation of property is tenuous and insignificant.
See Lupian, 905 F.3d at 136. As a result, the test is not
preempted.

       12
           As the Schwann court observed, while Congress
sought “to avoid ‘a patchwork of state service-determining
laws,’” we can assume that “Congress intended to leave
untouched” “pre-existing and customary manifestation[s] of
the state’s police power.” 813 F.3d at 438 (quoting Rowe, 552
U.S. at 373).

                                26
                             III

       For the foregoing reasons, we will affirm the District
Court’s order denying AEX’s motion for judgment on the
pleadings and remand for further proceedings.

                             27