Court Opinion

ID: 4588132
Source: CourtListenerOpinion
Date Created: 2020-11-19 21:02:34.175751+00
Date Added: 2024-06-11T13:50:39.905650
License: Public Domain

Filed 11/19/20

                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                         DIVISION FOUR

 THE PEOPLE,                                B304240

       Petitioner,                          (Los Angeles County
                                            Super. Ct. Nos.
       v.                                   BC689320, BC689321,
                                            BC689322)
 THE SUPERIOR COURT OF LOS
 ANGELES COUNTY,

       Respondent;

 CAL CARTAGE TRANSPORTATION
 EXPRESS, LLC, et al.,

       Real Parties in Interest.

      ORIGINAL PROCEEDINGS; petition for writ of mandate.
William F. Highberger, Judge. Petition granted.
      Office of the Los Angeles City Attorney, Michael N. Feuer,
Kathleen A. Kenealy, Michael J. Bostrom, Danielle L. Goldstein,
and Christopher S. Munsey for Petitioner.
      Gibson, Dunn & Crutcher, Joshua S. Lipshutz, Christopher
D. Dusseault, Michele L. Maryott, Dhananjay S. Manthripragada
for Cal Cartage Transportation Express, LLC, K&R
Transportation California, LLC, and CMI Transportation, LLC.
                                   1
      Scopelitis, Garvin, Light, Hanson & Feary, Christopher C.
McNatt, Jr. for CCX2931, LLC, CM2931, LLC, and KRT2931,
LLC.
      Altshuler Berzon, Stacey Leyton and Andrew Kushner for
International Brotherhood of Teamsters as Amicus Curiae on
behalf of Petitioner.
      Xavier Becerra, Attorney General, Thomas S. Patterson
Senior Assistant Attorney General, Tamar Pachter, and Jose A.
Zelidon-Zepeda, Deputy Attorneys General for the Attorney
General of California as Amicus Curiae on behalf of Petitioner.
      Barbara J. Parker, Oakland City Attorney, Maria Bee, Erin
Bernstein, Malia McPherson, and Nicholas DeFiesta for City of
Oakland as Amicus Curiae on behalf of Petitioner.
      Dennis J. Herrera, San Francisco City Attorney, Yvonne
Meré, and Molly Alarcon for City and County of San Francisco as
Amicus Curiae on behalf of Petitioner.
      Horvitz & Levy, Jeremy B. Rosen for The Chamber of
Commerce of the United States of America as Amicus Curiae on
behalf of Real Parties in Interest.
      Ellison, Whalen & Blackburn, Patrick J. Whalen for
Western States Trucking Association as Amicus Curiae on behalf
of Real Parties in Interest.
      Littler Mendelson, Richard H. Rahm for American
Trucking Associations, Inc. and California Trucking Association
as Amicus Curiae on behalf of Real Parties in Interest.

                               2
                        INTRODUCTION

       Does the Federal Aviation Administration Authorization
Act of 1994 (FAAAA) preempt application of California’s “ABC”
test, originally set forth in Dynamex Operations W. v. Superior
Court (2018) 4 Cal. 5th 903 (Dynamex) and eventually codified by
Assembly Bill 2257 (AB 2257), to determine whether a federally
licensed interstate motor carrier has correctly classified its truck
drivers as independent contractors? The FAAAA preempts state
laws “related to a price, route, or service of any motor
carrier . . . with respect to the transportation of property.”
(49 U.S.C. § 14501 (c)(1).) After surveying the FAAAA’s
legislative history and relevant federal caselaw, our Supreme
Court held the FAAAA does not preempt generally applicable
worker-classification laws that do not prohibit the use of
independent contractors. (People ex rel. Harris v. Pac Anchor
Transportation, Inc. (2014) 59 Cal. 4th 772, 785-87 (Pac Anchor).)
We hold the ABC test, as codified by AB 2257, is such a law, and
therefore is not preempted by the FAAAA.

      FACTUAL AND PROCEDURAL BACKGROUND1

      Defendants2 are federally licensed motor carriers that
operate or have operated “‘trucking and drayage
compan[ies] . . . in and around the Ports of Los Angeles and Long
Beach.’” Defendants utilize the services of independent owner-
operator truck drivers — independent truckers who lease their

1     The factual statements in this section are largely taken
from the allegations in the People’s complaints and the trial
court’s January 8, 2020 order.

2    Defendants are Cal Cartage Transportation Express, LLC,
CMI Transportation, LLC, K&R Transportation California, LLC,
CCX2931, LLC, CM2931, LLC, and KRT2931, LLC.
                              3
vehicles and services to a licensed motor carrier to move freight
under the motor carrier’s operating authority — to perform
drayage (defined in the complaints as “the short distance
transportation of cargo by truck to and from the ports”).
       In 2018, in connection with Senate Bill No. 1402,3 the
California Legislature found “California’s port drayage drivers
are the last American sharecroppers, held in debt servitude and
working dangerously long hours for little pay.” (Senate Bill
No. 1402 (2017-2018 Reg. Sess.) § 1(b).) It cited an investigative
report finding “‘port trucking companies in Southern California
have spent the past decade forcing drivers to finance their own
trucks by taking on debt they could not afford.’ The investigation
found instances where drivers ‘end up owing money to their
employers – essentially working for free.’” (Id., § 1(c).) The
Legislature further found “[d]rayage drivers at California ports
are routinely misclassified as independent contractors when they
in fact work as employees under California and federal labor
laws. A recent report finds that two-thirds of California port
drayage drivers fall under this category, and rampant
misclassification of drivers contributes to wage theft and leaves
drivers in a cycle of poverty.” (Id., § 1(f).)
       On January 8, 2018, the Los Angeles City Attorney, acting
on behalf of the People of the State of California, filed complaints
against the defendants in three related cases,4 alleging two

3     Senate Bill No. 1402 amended the California Labor Code
to, among other things, require the Division of Labor Standards
Enforcement to publicly post the identities of drayage companies
with unsatisfied misclassification judgments against them.
(Senate Bill No. 1402 (2017-2018 Reg. Sess.) § 2.)

4     The three related cases are: People v. Cal Cartage
Transportation Express LLC, et al. (Case No. BC689320); People
v. CMI Transportation LLC, et al. (Case No. BC689321); and
People v. K&R Transportation California LLC, et al. (Case No.
BC689322).
                                4
causes of action under the Unfair Competition Law (UCL), Cal.
Bus. & Prof. Code § 17200, et seq. The first cause of action is
predicated on defendants’ alleged misclassification of truck
drivers as independent contractors, and the second on
defendants’ alleged violations of the federal Truth-in-Leasing
Regulations, 49 C.F.R. § 376.1, et seq. The complaints allege
defendants misclassified truck drivers as independent contractors
and therefore engaged in unfair competition by failing to: (1) pay
unemployment insurance taxes (Unemp. Ins. Code, § 976); (2) pay
employment training fund taxes (id., § 976.6); (3) withhold state
disability insurance taxes (id., § 984); (4) withhold state income
taxes (id., § 13020); (5) provide workers’ compensation (Lab.
Code, § 3700); (6) provide employees with itemized written wage
statements (id., § 226) and to maintain and provide employees
with records in violation California’s Industrial Welfare
Commission wage order No. 9-2001, section 7 (Industrial Welfare
Commission Wage Order No. 9); (7) reimburse employees for
business expenses and losses (Lab. Code, § 2802); and (8) ensure
payment of the minimum wage at all times (Lab. Code, § 1194,
Industrial Welfare Commission Wage Order No. 9, § 4).
Specifically, the People allege defendants deduct from drivers’
pay, or fail to reimburse for, work-related expenses including
fuel, truck insurance, parking, and routine maintenance costs,
amounting to tens of thousands of dollars per year.
       When the People filed their complaints, the test for worker
classification in California was governed by S.G. Borello & Sons
v. Department of Industrial Relations (1989) 48 Cal. 3d 341
(Borello).5 In April 2018, our Supreme Court decided Dynamex,
replacing the Borello standard with the “ABC” test for claims
brought under California’s Wage Orders. The ABC test requires a

5        The Borello standard is a multi-factor test, not to be
“. . . ‘applied mechanically as separate tests[,]’” to determine
whether a worker is an employee or an independent contractor.
(Borello, supra, 48 Cal.3d at p. 351.)
                                   5
worker be classified as an employee unless: (A) “the worker is
free from the control and direction of the hiring entity in
connection with the performance of the work, both under the
contract for the performance of the work and in fact[;]” (B) “the
worker performs work that is outside the usual course of the
hiring entity’s business[;] and” (C) “the worker is customarily
engaged in an independently established trade, occupation, or
business[.]” (Dynamex, supra, 4 Cal.5th at p. 964.)
       In 2019, the Legislature passed and the Governor signed
into law Assembly Bill 5 (AB 5). Effective January 1, 2020, AB 5
codified (as Labor Code section 2750.3) the ABC test and
expanded its reach to apply to all claims under the Labor Code
and the Unemployment Insurance Code. (Stats. 2019, ch. 296,
§ 2.) AB 5 also included exemptions that were not part of the
Dynamex test, including an exemption for “business-to-business
contracting relationship[s].”
       On September 4, 2020, however, after the petition in these
related cases was filed, the Legislature passed and the Governor
signed AB 2257, which repealed and replaced the statutory
changes enacted by AB 5. (Stats. 2020, ch. 38, § 2.) AB 2257
revised certain exemptions to the ABC test, including the
business-to-business exemption, and created additional
exemptions. (Lab. Code § 2775, et seq.) Under Labor Code
section 2775, subdivision (a)(3), “[i]f a court of law rules that the
[ABC] test . . . cannot be applied to a particular context . . . then
the determination of employee or independent contractor status
in that context shall instead be governed by [Borello].”6 Because
the parties disagreed whether the ABC test or the Borello

6      On September 16, 2020, we requested supplemental
briefing from the parties to address the significance, if any, of the
revisions to the statutes put in place by AB 2257. We reviewed
the supplemental briefs, and, in this opinion, address whether
the relevant statutes, as modified by AB 2257, are preempted by
the FAAAA.
                                  6
standard applies to the People’s misclassification-based UCL
claims, the trial court permitted defendants to submit a motion in
limine, before substantial discovery or filing of dispositive
motions, addressing (1) whether Dynamex is preempted by
federal law; and (2) whether Dynamex can be applied
retroactively.7 Following two rounds of briefing and two hearings,
the trial court directed both parties to lodge proposed orders.
After argument at the second hearing, the trial judge noted he
was “tending away from finding preemption[,]” but that his
indecision “would tend to indicate why it’s a very suitable matter
for appeal.” Ultimately, the court adopted defendants’ proposed
order without significant modification, granting in part
defendants’ motion in limine. It held “[b]ecause Prong B of the
ABC Test under both Dynamex and AB 5 prohibits motor carriers
from using independent contractors to provide transportation
services, the ABC Test has an impermissible effect on motor
carriers’ ‘price[s], route[s], [and] service[s]’ and is preempted by
the FAAAA.” It certified its ruling for writ review pursuant to
Code of Civil Procedure section 166.1.
       The People petitioned this court for a writ of mandate
directing respondent court to vacate its order or, at a minimum,
to issue an alternative writ or order to show cause directing the
real parties in interest to show cause why the writ should not
issue. We summarily denied the petition. The California Supreme
Court granted the People’s petition for review and transferred the
matter back to this court with directions to vacate our order

7     Although used most often to resolve questions of
admissibility of evidence, use of a motion in limine to secure an
early ruling on a potentially dispositive legal issue can be a
useful tool in the management of complex litigation. Trial courts
have inherent powers to employ motions in limine to dispose of
claims in appropriate circumstances. (Amtower v. Photon
Dynamics, Inc. (2008) 158 Cal. App. 4th 1582, 1595; Blanks v.
Seyfarth Shaw LLP (2009) 171 Cal. App. 4th 336, 375-376.)
                                  7
denying mandate and to issue an order directing respondent
superior court to show cause why the relief sought in the petition
should not be granted. We complied, issuing an order to show
cause on July 10, 2020. Real parties in interest filed a return, and
the People filed a reply. We also granted the applications of the
International Brotherhood of Teamsters, the California Attorney
General, the City of Oakland, and the City and County of San
Francisco to file amicus briefs in support of the People, and The
Chamber of Commerce of the United States of America, American
Trucking Associations, Inc. and California Trucking Association,
and Western States Trucking Association to file amicus briefs in
support of defendants.

                          DISCUSSION

   A. Standard of Review and Federal Preemption
      Principles

       We review de novo a trial court’s decisions regarding
preemption and statutory construction. (See, e.g., Roberts v.
United Healthcare Services, Inc. (2016) 2 Cal. App. 5th 132, 142
[“Where, as here, preemption turns on questions of law such as
the meaning of a preemption clause or the ascertainment of
congressional intent, our review is de novo. [Citations.]”]; Farm
Raised Salmon Cases (2008) 42 Cal. 4th 1077, 1089, fn. 10
[“federal preemption presents a pure question of law.
[Citation.]”].) Also, “[w]hen a motion in limine ‘results in the
entire elimination of a cause of action or a defense, we treat it as
a demurrer to the evidence and review the motion de
novo . . . .’ [Citation.]” (Legendary Investors Group No. 1, LLC v.
Niemann (2014) 224 Cal. App. 4th 1407, 1411)
      “The United States Supreme Court has identified ‘two
cornerstones’ of federal preemption analysis. [Citation.] First, the
question of preemption ‘“fundamentally is a question of

                                 8
congressional intent.”’ [Citations.] If a statute ‘contains an
express pre-emption clause, our “task of statutory construction
must in the first instance focus on the plain wording of the
clause, which necessarily contains the best evidence of Congress’
pre-emptive intent.”’ [Citations.] ‘“Also relevant, however, is the
‘structure and purpose of the statute as a whole,’ [citation] as
revealed not only in the text, but through the reviewing court’s
reasoned understanding of the way in which Congress intended
the statute and its surrounding regulatory scheme to affect
business, consumers, and the law.”’ [Citations.]” (Brown v.
Mortensen (2011) 51 Cal. 4th 1052, 1059-1060.)

   B.   The FAAAA

       Our Supreme Court explained the history and purpose of
the FAAAA in Pac Anchor, supra, 59 Cal.4th at p. 779-782. “‘In
1978, Congress “determine[d] that ‘maximum reliance on
competitive market forces’” would favor lower airline fares and
better airline service, and it enacted the [Airline Deregulation
Act (ADA)].’ [Citation.] ‘In order to ensure that the States would
not undo federal deregulation with regulation of their own,” that
Act “included a pre-emption provision” that said “no
State . . . shall enact or enforce any law . . . relating to rates,
routes, or services of any air carrier.”’ [Citation.]” (Id. at p. 779.)
       In 1980, Congress deregulated trucking with the adoption
of the Motor Carrier Act of 1980 (Pub. L. No. 96-296
(July 1, 1980) 94 Stat. 793.) “‘In 1994, Congress similarly sought
to pre-empt state trucking regulation[]’ [citation]” with the
adoption of the FAAAA. (Pac Anchor, supra, 59 Cal.4th at p. 779.)
In doing so, it borrowed language from the ADA and included the
following express preemption clause: “Except as provided in
paragraphs (2) and (3), a State, political subdivision of a State, or
political authority of 2 or more States may not enact or enforce a
law, regulation, or other provision having the force and effect of

                                  9
law related to a price, route, or service of any motor
carrier . . . with respect to the transportation of property.”
(49 U.S.C. § 14501(c)(1).) “Specifically, the FAAAA was intended
to prevent state regulatory practices including ‘entry controls,
tariff filing and price regulation, and [regulation of] types of
commodities carried.’ (H.R. Rep. No. 103-677, 2d Sess., p.
86 (1994), reprinted in 1994 U.S. Code Cong. & Admin. News,
p. 1758).” (Pac Anchor, supra, 59 Cal.4th at pp. 779-780.) “The
phrase ‘related to,” [in the FAAAA’s preemption
clause] . . . embraces state laws ‘having a connection with or
reference to’ carrier ‘“rates, routes, or services,”’ whether directly
or indirectly. [Citations.]” (Dan’s City Used Cars, Inc. v. Pelkey
(2013) 569 U.S. 251, 260 [133 S. Ct. 179, 185 L. Ed. 2d 909] (Dan
City).) The FAAAA, however, does not “preempt state laws
affecting carrier prices, routes, or services ‘in only a “tenuous,
remote, or peripheral . . . manner.”’ [Citations.] (Id. at p. 261
(alteration in original).)
       The defendants offered no evidence, and the trial court
made no factual findings, concerning the impact, if any, of
application of the ABC test on motor carriers’ prices, routes, and
services.8 To the extent they had a burden to prove more than a
tenuous or peripheral impact, rather than simply make
arguments, the defendants did not carry it. If we were writing on
a clean slate, that would end our inquiry and we would conclude
defendants failed to demonstrate that application of the ABC test
actually would impact prices, routes, or services. But we are not.

8      The trial court made only one factual finding, stating that
in circumstances where defendants “contracted with licensed
motor-carriers to transport loads, the cost of such transport was
nearly triple the cost of using independent owner-operators for
the same route.” But that finding is irrelevant to our inquiry.
There is no evidence in the record of the pricing impact, if any, of
defendants using employees rather than independent contractors,
nor of contracting with businesses other than a licensed motor
carrier to transport loads.
                                  10
Instead, courts have taken to deciding similar issues on their
own, based on something other than facts or expert opinion. For
example, in Pac Anchor our Supreme Court decided whether an
action under California’s Unfair Competition Law was preempted
by the FAAAA without a developed factual record (the defendants
presented the issue in the context of a motion for judgment on the
pleadings). (Pac Anchor, supra, 59 Cal.4th at pp. 775-777.)9 And
so, we turn to the central issue: does the FAAAA preempt
application of the ABC test?10

9     See also Schwann v. FedEx Ground Package Sys. (1st
Cir. 2016) 813 F.3d 429, 437, quoting Mass. Delivery Ass’n v.
Coakley (1st Cir. 2014) 769 F.3d 11, 21 (Schwann) (“‘[A] statute’s
“potential” impact on carriers’ prices, routes, and services’ need
not be proven by empirical evidence; rather, courts may ‘look[ ] to
the logical effect that a particular scheme has on the delivery of
services.’ [Citations.]”)

10    The same issue is pending in the Ninth Circuit in
California Trucking Ass’n, et al. v. Becerra, et al., case Nos. 20-
55106 and 20-55107. The case was argued and, as of the date of
this opinion, is under submission. The First Circuit held prong B
of Massachusetts’ ABC test (which contains the same language as
California’s ABC test) is preempted by the FAAAA. (Schwann,
supra, 813 F.3d at p. 440.) The federal district courts are split on
the issue. (See, e.g., Henry v. Cent. Freight Lines, Inc. (E.D. Cal.
June 13, 2019) 2019 U.S. Dist. LEXIS 99594, at p. 19 [holding the
FAAAA does not preempt application of the ABC test because the
“ABC test is a general classification test that does not apply to
motor carriers specifically and does not, by its terms, compel a
carrier to use an employee or an independent contractor”];
Western States Trucking Ass’n v. Schoorl (E.D. Cal. 2019)
377 F. Supp. 3d 1056, 1072-1073 [same]; Alvarez v. XPO Logistics
Cartage LLC (C.D. Cal. Nov. 15, 2018) 2018 U.S. Dist. LEXIS
208110, at p. 15 [finding the FAAAA preempts the ABC test];
Valdez v. CSX Intermodal Terminals, Inc. (N.D. Cal. Mar. 15,
2019) 2019 U.S. Dist. LEXIS 77258, at pp. 24-28 [finding the
FAAAA preempts part B of the ABC test].)
                                  11
   C.   The FAAAA Does Not Preempt the ABC Test

       Defendants contend prong B of the ABC test makes it
impossible for a motor carrier to contract with an owner-operator
as an independent contractor, and thus the ABC test is
preempted by the FAAAA under the clear terms of Pac Anchor.
The People counter the ABC test is not preempted because it is a
generally applicable employment law that does not prohibit the
use of independent contractors, and therefore does not have an
impermissible effect on prices, routes, or services. We agree with
the People. Our conclusion is compelled by the California
Supreme Court’s decision in Pac Anchor, and the FAAAA’s
legislative history, as discussed below.
       In Pac Anchor, the California Supreme Court held the
FAAAA did not preempt a claim under the UCL premised on
truck drivers being misclassified as independent contractors.11
The defendants argued the “People’s UCL claim will significantly
affect motor carrier prices, routes, and services because its
application will prevent their using independent contractors,
potentially affecting their prices and services.” (Pac Anchor,
supra, 59 Cal.4th at p. 785.) They also contended “if the People’s
UCL action is successful, they will have to reclassify their drivers
as employees, driving up their cost of doing business and thereby
affecting market forces.” (Ibid.) After analyzing the legislative
history of the FAAAA and relevant United States Supreme
Court, Ninth Circuit, and other precedent, the Pac Anchor court
rejected the defendants’ arguments. (Id. at pp. 782-784.) The

11     The People’s UCL claim here is essentially identical to that
in Pac Anchor. Both are premised on an alleged misclassification
of truck drivers as independent contractors rather than
employees. (See Pac Anchor, supra, 59 Cal.4th at p. 776.) At the
second hearing in the trial court, the People’s counsel noted he
used the complaint in Pac Anchor “as a model” when drafting one
of the complaints in this action.
                                  12
court reasoned that a “UCL action that is based on an alleged
general violation of labor and employment laws does not
implicate [Congress’s] concerns” about “regulation of motor
carriers with respect to the transportation of property[.]” (Id. at
p. 783.) It further explained: “Defendants’ assertion that the
People may not prevent them from using independent contractors
is correct, but its characterization of the People’s UCL claim is
not. Nothing in the People’s UCL action would prevent
defendants from using independent contractors. The People
merely contend that if defendants pay individuals to drive their
trucks, they must classify these drivers appropriately and comply
with generally applicable labor and employment laws.” (Id. at
p. 785) The court also rejected defendants’ argument that
enforcement of California’s general employment laws was
contrary to the FAAAA’s “deregulatory purpose.” (Id. at p. 786.)
The court explained that while “Congress passed the FAAAA in
order to end a patchwork of state regulations[,] . . . 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. [Citations.]” (Ibid.)
       Pac Anchor is dispositive. Like the labor laws examined in
that case, the ABC test is a law of general application.12 The ABC

12     We reject defendants’ contention that the ABC test, as
codified in AB 2257, is not a law of general application because
the law includes exemptions for several occupations and
industries. (See, e.g., Godfrey v. Oakland Port Services Corp.
(2014) 230 Cal. App. 4th 1267, 1280 [finding California’s meal and
rest break laws to be generally applicable – and not preempted by
the FAAAA – despite those laws’ legislative exemptions].) But we
recognize, as did our Supreme Court in Pac Anchor, that even
laws of general applicability can be preempted if they have a
direct effect on carriers’ prices, routes, or services. (Pac Anchor,
supra, 59 Cal.4th at pp. 784-785; see also Morales v. TWA (1992)
504 U.S. 374, 386 [112 S. Ct. 2031, 119 L. Ed. 2d 157].)
                                   13
test does not mandate the use of employees for any business or
hiring entity. Instead, the ABC test is a worker-classification test
that states a general and rebuttable presumption that a worker
is an employee unless the hiring entity demonstrates certain
conditions. That independent owner-operator truck drivers, as
defendants currently use them, may be incorrectly classified, does
not mean the ABC test prohibits motor carriers from using
independent contractors. The ABC test, therefore, is not the type
of law Congress intended to preempt. (See Pac Anchor, supra,
59 Cal.4th at p. 787 [noting the congressional record showed
“Congress disapproved of a California law that denied
advantageous regulatory exemptions to motor carriers who used
a large proportion of independent contractors[,]” but unlike that
law, “the People’s UCL action does not encourage employers to
use employee drivers rather than independent contractors.
Defendants are free to use independent contractors as long as
they are properly classified[.]”].)
       Pac Anchor also relied on the Ninth Circuit’s discussion in
Californians for Safe & Competitive Dump Truck Transp. v.
Mendonca (9th Cir. 1998) 152 F.3d 1184 (Mendonca) of indirect
evidence of Congress’s intent when it enacted the FAAAA. In
Mendonca, the court held California’s generally applicable
prevailing wage laws were not preempted by the FAAAA in part
because several states Congress identified as not having laws
regulating interstate trucking had prevailing wage laws in place
at the time the FAAAA was enacted. (Pac Anchor, supra, 59
Cal.4th at p. 786.) Pac Anchor noted “[s]imilarly, eight out of the
10 jurisdictions identified in Mendonca had generally applicable
laws governing when a worker is an independent contractor (or
the equivalent) and when a worker is an employee. [Citations.]
Thus, even though the People’s UCL action may have some
indirect effect on defendants’ prices or services, that effect is ‘“too
tenuous, remote [and] peripheral . . . to have pre-emptive effect.”’
[Citation.]” (Ibid.) Notably, one of the statutes Pac Anchor

                                  14
identified, Wis. Stat. § 102.07, contains similar language to prong
B of California’s ABC test. (Compare Wis. Stat. § 102.07,
subd. (8)(a) (1994) [“Except as provided in par. (b) and (bm), every
independent contractor is, for the purpose of this chapter, an
employee of any employer under this chapter for whom he or she
is performing service in the course of the trade, business,
profession or occupation of such employer at the time of the
injury”] and Lab. Code, § 2775, subd. (b)(1)(B) [a worker is an
employee unless the hiring entity can demonstrate “[t]he person
performs work that is outside the usual course of the hiring
entity’s business.”].) As noted in Pac Anchor, this legislative
history suggests Congress did not intend to preempt worker-
classification laws like the ABC test.
       Moreover, that the statutory scheme codified by AB 2257 is
not one that prohibits motor carriers from using independent
contractors (and therefore, does not have an impermissible effect
on prices, routes, or services) is further supported by the
business-to-business exemption in Labor Code section 2776.
Under that exemption, the ABC test does not apply to a business-
to-business contracting relationship, including contracts between
licensed motor carriers and independent owner-operators who
may operate as sole proprietorships, LLC’s, or other business
entities, if the hiring entity demonstrates a list of criteria is
satisfied. (Lab. Code, § 2776, subd. (a).) If an individual or entity
qualifies for the exemption, “the determination of employee or
independent contractor status [of the individual doing the work]
shall [ ] be governed by [the Borello standard].”13 (Ibid.)

13    The full text of the business-to-business exemption states:
“Section 2775 and the holding in Dynamex do not apply to a bona
fide business-to-business contracting relationship, as defined
below, under the following conditions: [¶] (a) If an individual
acting as a sole proprietor, or a business entity formed as a
partnership, limited liability company, limited liability
partnership, or corporation (‘business service provider’) contracts
                                  15
to provide services to another such business or to a public agency
or quasi-public corporation (‘contracting business’), the
determination of employee or independent contractor status of
the business services provider shall be governed by Borello, if the
contracting business demonstrates that all of the following
criteria are satisfied: [¶] (1) The business service provider is free
from the control and direction of the contracting business entity
in connection with the performance of the work, both under the
contract for the performance of the work and in fact. [¶] (2) The
business service provider is providing services directly to the
contracting business rather than to customers of the contracting
business. This subparagraph does not apply if the business
service provider’s employees are solely performing the services
under the contract under the name of the business service
provider and the business service provider regularly contracts
with other businesses. [¶] (3) The contract with the business
service provider is in writing and specifies the payment amount,
including any applicable rate of pay, for services to be performed,
as well as the due date of payment for such services. [¶] (4) If the
work is performed in a jurisdiction that requires the business
service provider to have a business license or business tax
registration, the business service provider has the required
business license or business tax registration. [¶] (5) The business
service provider maintains a business location, which may
include the business service provider’s residence, that is separate
from the business or work location of the contracting business. [¶]
(6) The business service provider is customarily engaged in an
independently established business of the same nature as that
involved in the work performed. [¶] (7) The business service
provider can contract with other businesses to provide the same
or similar services and maintain a clientele without restrictions
from the hiring entity. [¶] (8) The business service provider
advertises and holds itself out to the public as available to
provide the same or similar services. [¶] (9) Consistent with the
nature of the work, the business service provider provides its own
tools, vehicles, and equipment to perform the services, not
including any proprietary materials that may be necessary to
perform the services under the contract. [¶] (10) The business
service provider can negotiate its own rates. [¶] (11) Consistent
with the nature of the work, the business service provider can set
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Defendants argue independent owner-operators can never meet
several of the requirements in the business-to-business
exemption, and thus, the exemption does not save the statutes
codified by AB 2257 from preemption. We are unpersuaded.
       First, defendants argue the licensing requirement of the
exemption makes it impossible for independent owner-operators
to qualify for the exemption: “If the work is performed in a
jurisdiction that requires the business service provider to have a
business license or business tax registration, the business service
provider has the required business license or business tax
registration.” (Lab. Code, § 2776, subd. (a)(4).) Defendants claim
this provision requires truck drivers to have a federal motor
carrier operating license, but “[i]ndependent owner-operator
truck drivers, by definition lack motor carrier licenses and thus
cannot meet this requirement.” We agree with the People,
however, that the more natural construction of a “business
license” is that the phrase refers to the licenses issued by local
governments (“jurisdictions” within the State of California) for
health and safety regulation and tax purposes. Indeed, other
subdivisions of AB 2257 distinguish between “business license[s]”
and other permits and licenses. (See, e.g., Lab. Code, § 2781,
subds. (c) & (h)(1)(C) [for the construction industry exemption,
the contractor must demonstrate, among other requirements,

its own hours and location of work. [¶] (12) The business service
provider is not performing the type of work for which a license
from the Contractors’ State License Board is required, pursuant
to Chapter 9 (commencing with Section 7000) of Division 3 of the
Business and Professions Code. [¶] (b) When two bona fide
businesses are contracting with one another under the conditions
set forth in subdivision (a), the determination of whether an
individual worker who is not acting as a sole proprietor or formed
as a business entity, is an employee or independent contractor of
the business service provider or contracting business is governed
by Section 2775. [¶] (c) This section does not alter or supersede
any existing rights under Section 2810.3.” (Lab. Code, § 2776.)
                                  17
that the “subcontractor has the required business license or
business tax registration” and the “subcontractor utilizes its own
employees to perform the construction trucking services, unless
the subcontractor is a sole proprietor who operates their own
truck to perform the entire subcontract and holds a valid motor
carrier permit issued by the Department of Motor Vehicles.”].)
       Second, the business-to-business exemption applies only if
the owner-operator is “providing services directly to the [motor
carrier] rather than to customers of the [motor carrier].” (Lab.
Code, § 2776, subd. (a)(2).) Defendants contend this condition is
impossible for an owner-operator to meet because an owner-
operator contracting with a motor carrier necessarily is providing
services to the motor carrier’s customers by moving the
customer’s goods at the customer’s direction. But defendants
provide no support for their strained reading of this provision.
Motor carriers — not the motor carriers’ customers — could
contract with owner-operators (or other business entities meeting
the requirements of the business-to-business exemption), direct
their actions, and pay them. Services would be provided by the
owner-operators directly to the motor carriers, notwithstanding
that those services would include moving freight belonging to the
motor carrier’s customers.
       Moreover, defendants offered no evidence demonstrating it
would be impossible to meet the requirements of the business-to-
business exemption. Indeed, the only evidence submitted in the
trial court (attached to the People’s counsel’s declaration in
support of their opposition to defendants’ motion in limine)
indicates at least one defendant does not operate any of its own
trucks, and instead contracts not only with independent truckers,
but also with trucking companies. Those trucking companies,
referred to as “outside carriers” or “outside brokers,” are legally
organized business entities and appear to be among the kinds of
businesses contemplated by the business-to-business exemption.

                                18
       We therefore conclude defendants have not demonstrated,
as they must under Pac Anchor, that application of the ABC test
prohibits motor carriers from using independent contractors or
otherwise directly affects motor carriers’ prices, routes, or
services. Nothing in Pac Anchor nor the FAAAA’s legislative
history suggests Congress intended to preempt a worker-
classification test applicable to all employers in the state.

                               19
                        DISPOSITION

       Let a peremptory writ of mandate issue directing
respondent court to vacate its January 8, 2020 order granting in
part defendants’ motion in limine, and enter a new order denying
that motion because the statutory amendments implemented by
AB 2257 are not preempted by the FAAAA. We express no view
on the two alternative arguments raised in defendants’ motion in
limine, which respondent court denied without prejudice, i.e.,
whether the ABC test violates the Dormant Commerce Clause or
that it may not be applied retroactively. The People are awarded
their costs in this original proceeding.

                  CERTIFIED FOR PUBLICATION

     CURREY, J.

     We concur:

     MANELLA, P.J.

     COLLINS, J.

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