Cal. Trucking Ass'n v. Julie Su

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

CALIFORNIA TRUCKING No. 17-55133
ASSOCIATION,
Plaintiff-Appellant, D.C. No.
CV 16-1866 CAB
v.

JULIE A. SU, OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the Southern District of California
Cathy Ann Bencivengo, District Judge, Presiding

Argued and Submitted March 7, 2018
Pasadena, California

Filed September 10, 2018

Before: A. Wallace Tashima, Richard A. Paez,*
and Jacqueline H. Nguyen, Circuit Judges.

Opinion by Judge Tashima

*
Following the death of Judge Reinhardt, who originally was a
member of this panel, Judge Paez was randomly drawn to replace him. He
has read the briefs, reviewed the record, and listened to a recording of oral
argument.
2 CAL. TRUCKING ASS’N V. SU

SUMMARY**

Labor Law

The panel affirmed the district court’s dismissal of an
action seeking declaratory and injunctive relief regarding the
Labor Commissioner of the State of California Department of
Industrial Relations’ use of a common law test, often referred
to as the Borello standard, to determine whether a motor
carrier has properly classified its drivers as independent
contractors.

Classifications pursuant to the Borello standard impact
what benefits workers are entitled to under the State’s labor
laws and the corresponding burdens placed on the entities that
hire them. California Trucking Association, an association of
licensed motor carriers, alleged that its “owner-operator”
drivers were independent contractors, rather than employees.
CTA alleged that the Commissioner’s application of the
Borello standard disrupted the contractual arrangements
between owner-operators and motor carriers, which
introduced inefficiencies into the transportation services
market and was inconsistent with Congress’s deregulatory
goals under the Federal Aviation Administration
Authorization Act.

The panel held that the Borello standard, a generally
applicable test used in a traditional area of state regulation, is
not “related to” prices, routes, or services, and therefore is not
preempted by the FAAAA.

**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 CAL. TRUCKING ASS’N V. SU 3

COUNSEL

Adam Carl Smedstad (argued), Scopelitis Garvin Light
Hanson & Feary, PC, Chicago, Illinois, for Plaintiff-
Appellant.

Miles E. Locker (argued), Department of Industrial Relations,
California Division of Labor Standards Enforcement, San
Francisco, California, for Defendant-Appellee.

OPINION

TASHIMA, Circuit Judge:

The issue in this case is whether the Federal Aviation
Administration Authorization Act of 1994 (“FAAAA”)
preempts the California Labor Commissioner’s use of a
common law test, often referred to as the Borello standard,1
to determine whether a motor carrier has properly classified
its drivers as independent contractors. Classifications
pursuant to the Borello standard impact what benefits workers
are entitled to under the State’s labor laws and the
corresponding burdens placed on the entities that hire them.
We hold that the Borello standard, a generally applicable test
used in a traditional area of state regulation, is not “related
to” prices, routes, or services, and therefore is not preempted.
By the FAAAA Accordingly, we affirm the district court.

1
See generally S. G. Borello & Sons, Inc. v. Dep’t of Indus. Relations,
769 P.2d 399, 403–07 (Cal. 1989).
4 CAL. TRUCKING ASS’N V. SU

FACTUAL AND PROCEDURAL BACKGROUND2

Plaintiff-Appellant California Trucking Association
(“CTA”) is an association devoted to advancing the interests
of its motor carrier members.3 CTA members are licensed
motor carrier companies that manage, coordinate, and
schedule the movement of property throughout California in
interstate commerce. Based on factors such as efficiency and
market demand, CTA members use either “company drivers”
or “owner-operators” to haul freight. As expected, “company
drivers” haul freight using trucks that are owned by the motor
carrier; “owner-operators” use their own trucks. When CTA
members use owner-operators, the parties enter into contracts
providing, generally, that the owner-operators: (1) must
provide the truck and a qualified driver to haul the freight;
(2) must be responsible for operating expenses like truck
maintenance, repair, and refueling; (3) will, in turn, have
control over whether and how to perform a haul; and (4) will
then be paid at an agreed-upon rate. CTA alleges that owner-
operators are independent contractors.

2
We accept the factual allegations in CTA’s Complaint as true and
construe them in the light most favorable to CTA. Soo Park v. Thompson,
851 F.3d 910, 918 (9th Cir. 2017). We reject CTA’s contention that the
district court failed to do the same. The district court was not required to
accept the truth of any legal conclusions, Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009), and the district court’s summary of CTA’s legal arguments
does not, in any way, demonstrate that it applied an incorrect standard of
review.
3
“A ‘motor carrier’ is an individual, a partnership, or a corporation
engaged in the transportation of goods; those engaged in interstate
commerce are subject to, inter alia: Department of Transportation
regulations; the Motor Carrier Acts; and the Motor Carrier Safety Acts.”
Am. Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1049 n.4
(9th Cir. 2009) (“American Trucking”) (citations omitted).
 CAL. TRUCKING ASS’N V. SU 5

CTA filed suit against Defendant-Appellee Julie Su in her
official capacity as Labor Commissioner of the State of
California Department of Industrial Relations (the
“Commissioner”). The Commissioner is responsible for
enforcing the California Labor Code, which affords certain
benefits and protections to workers who qualify as
employees. As with any other industry, the Commissioner
applies the Borello standard to assess owner-operators’
claims that they have been misclassified as independent
contractors and so denied certain benefits under the Labor
Code. CTA alleges the Commissioner’s application of the
Borello standard disrupts the contractual arrangements
between owner-operators and motor carriers, which
introduces inefficiencies into the transportation services
market and is inconsistent with Congress’ deregulatory goals
under the FAAAA. CTA therefore seeks a declaration that
the FAAAA preempts the Commissioner’s application of the
Borello standard to disrupt these contracts, and corresponding
injunctive relief barring the Commissioner from applying the
Borello standard to motor carriers.

The Commissioner moved to dismiss CTA’s Complaint
under Federal Rule of Civil Procedure 12(b)(6). The district
court granted the motion, concluding that the Borello
standard used by the Commissioner was not preempted under
the FAAAA. The district court denied CTA’s motion for
reconsideration, and CTA timely appealed the dismissal of its
Complaint.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction under 28 U.S.C. § 1291. We review
de novo a district court’s decision regarding preemption, Dilts
v. Penske Logistics, LLC, 769 F.3d 637, 640 (9th Cir. 2014),
6 CAL. TRUCKING ASS’N V. SU

as well as a dismissal under Rule 12(b)(6), Soo Park,
851 F.3d at 918.

DISCUSSION

A. Background Principles

This case involves a purported clash between a common
law test used to enforce California’s labor laws and a federal
statute aimed at preventing States from undermining federal
deregulation of interstate transport. We provide a brief
overview of each, before explaining why the latter does not
preempt the former.

1. The Borello Standard

In Borello, the California Supreme Court discussed at
length the common law test for determining whether a worker
is an employee or an independent contractor. See 769 P.2d at
403–07; see also Dynamex Operations W. v. Superior Court,
416 P.3d 1, 15 (Cal. 2018) (describing Borello as “the
seminal California decision on this subject”). “Under the
common law, “‘[t]he principal test of an employment
relationship is whether the person to whom service is
rendered has the right to control the manner and means of
accomplishing the result desired.”’” Ayala v. Antelope Valley
Newspapers, Inc., 327 P.3d 165, 171 (Cal. 2014) (quoting
Borello, 769 P.2d at 404). “Perhaps the strongest evidence of
the right to control is whether the hirer can discharge the
worker without cause . . . .” Id. Aside from the right to
control, courts also consider a list of “secondary indicia” that
inform the task of classifying workers. See id. Drawn from
the Restatement Second of Agency, these include
 CAL. TRUCKING ASS’N V. SU 7

(a) whether the one performing services is
engaged in a distinct occupation or business;
(b) the kind of occupation, with reference to
whether, in the locality, the work is usually
done under the direction of the principal or by
a specialist without supervision; (c) the skill
required in the particular occupation;
(d) whether the principal or the worker
supplies the instrumentalities, tools, and the
place of work for the person doing the work;
(e) the length of time for which the services
are to be performed; (f) the method of
payment, whether by the time or by the job;
(g) whether or not the work is a part of the
regular business of the principal; and
(h) whether or not the parties believe they are
creating the relationship of employer-
employee.

Borello, 769 P.2d at 404. The Borello standard is neither
mechanical nor inflexible; different cases can and do demand
focus on different factors. See id. While an affirmative
agreement to classify a particular worker one way or another
may be considered, it “is not dispositive, and subterfuges are
not countenanced.” Id. at 403. Instead, the Borello standard
is applied with an eye towards the purpose of the remedial
statute being enforced. Dynamex, 416 P.3d at 19–20. “In
other words, Borello calls for the application of a statutory
purpose standard that considers the control of details and
other potentially relevant factors identified in prior California
and out-of-state cases in order to determine which
classification . . . best effectuates the underlying legislative
intent and objective of the statutory scheme at issue.” Id.
8 CAL. TRUCKING ASS’N V. SU

We have applied the Borello standard when assessing
misclassification claims in the motor carriage industry. See,
e.g., Narayan v. EGL, Inc., 616 F.3d 895, 900–04 (9th Cir.
2010). Relevant here, the Commissioner applies the Borello
standard when adjudicating and enforcing claims within her
jurisdiction. If she were to determine that, under Borello,
certain owner-operators are employees of a motor carrier, this
could result in obligations under the California Labor Code
that are inconsistent with the parties’ contractual
arrangements (e.g., who is responsible for truck maintenance
expenses). CTA contends the FAAAA thus compels the
Commissioner and courts to accept the parties’ agreements at
face value. The Commissioner, in turn, seeks the power (as
with any other employer) to look behind the agreements and
apply the Borello standard to ensure that owner-operators are,
in fact, independent contractors.4

4
Shortly after argument in this case, the California Supreme Court
decided Dynamex, which addressed the classification of workers for
purposes of California wage orders. 416 P.3d at 4–7, 25–42. Dynamex
held that the “suffer or permit to work” definition of “employ” in a
particular wage order must be determined based on the “ABC” test – not
the Borello standard. See id. at 7, 40. Under the “ABC” test, a worker
must meet three, separate criteria to be considered an independent
contractor. See id. at 7, 36–40. One criteria (“B”) is “that the worker
performs work that is outside the usual course of the hiring entity’s
business.” Id. at 7, 37–38. Under Borello, this is one factor among many
– and not even the most important one. See 769 P.2d at 404.

We do not believe Dynamex has any impact here (nor have the parties
argued that it does). CTA seeks relief from California’s common law
definition of employee, as reflected in Borello. CTA has not alleged that
the Commissioner employs the “ABC” test, nor has it sought relief on this
basis. Moreover, Dynamex did not purport to replace the Borello standard
in every instance where a worker must be classified as either an
independent contractor or an employee for purposes of enforcing
California’s labor protections. See 416 P.3d at 7 n.5, 13, 29.
 CAL. TRUCKING ASS’N V. SU 9

2. The FAAAA

The FAAAA expressly preempts certain state regulation
of intrastate motor carriage. 49 U.S.C. § 14501(c)(1). “In
considering the preemptive scope of a statute, congressional
intent is the ultimate touchstone.” Dilts, 769 F.3d at 642
(citation and internal quotation marks omitted). With express
preemption, “we focus first on the statutory language, which
necessarily contains the best evidence of Congress’ pre-
emptive intent.” Dan’s City Used Cars, Inc. v. Pelkey,
569 U.S. 251, 260 (2013) (citation and internal quotation
marks omitted). The FAAAA provides:

(c) Motor carriers of property.–(1) General
rule. 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
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). This language resembles that found
in the air carrier preemption provision of the Airline
Deregulation Act (“ADA”), except for the FAAAA’s
inclusion of the phrase, “with respect to the transportation of
property.” Compare id., with 49 U.S.C. § 41713(b)(1). ADA
preemption cases can therefore be consulted to analyze
10 CAL. TRUCKING ASS’N V. SU

FAAAA preemption. See Rowe v. N.H. Motor Transp. Ass’n,
552 U.S. 364, 370–71 (2008).5

In the context of the ADA and FAAAA, “[t]he phrase
‘related to’ embraces state laws ‘having a connection with or
reference to’ carrier ‘rates, routes, or services,’ whether
directly or indirectly.” Dan’s City, 569 U.S. at 260 (quoting
Rowe, 552 U.S. at 370). While “related to” preemption is
broad, this “does not mean the sky is the limit,” or else “pre-
emption would never run its course.” Id. (citation and
internal quotation marks omitted). Thus, the FAAAA does
not preempt state laws that affect a carrier’s prices, routes, or
services in only a “tenuous, remote, or peripheral . . . manner”
with no significant impact on Congress’s deregulatory
objectives. Rowe, 552 U.S. at 371 (quoting Morales v. Trans
World Airlines, Inc., 504 U.S. 374, 390 (1992)) (alteration in
original). Our task, then, is to discern on which side of the
line the Borello standard falls: a forbidden law that
significantly impacts a carrier’s prices, routes, or services; or,
a permissible one that has only a tenuous, remote, or
peripheral connection. Dilts, 769 F.3d at 643.

Because this task has nuance, we may “turn . . . to the
legislative history and broader statutory framework of the
FAAAA” to better glean Congress’ intent. Id. We have
previously recounted the FAAAA’s history and purpose in
detail, so, for our purposes here, it is sufficient to note that
Congress passed the FAAAA to achieve two broad goals. See
Californians For Safe & Competitive Dump Truck Transp. v.
Mendonca, 152 F.3d 1184, 1187 (9th Cir. 1998). First, it

5
The Commissioner does not dispute that the transportation of
property is involved here, and so we focus on the “related to a price, route,
or service” element of FAAAA preemption.
 CAL. TRUCKING ASS’N V. SU 11

aimed “to even the playing field between air carriers and
motor carriers.” Id. (citation and internal quotation marks
omitted). Prior decisions applied ADA preemption to
regulations of air carriers, but not motor carriers, which gave
air carriers a competitive advantage. Id. The FAAAA was an
attempt at “parity.” Dilts, 769 F.3d at 644. Second, Congress
believed deregulation would address the inefficiencies, lack
of innovation, and lack of competition caused by non-uniform
state regulations of motor carriers. Mendonca, 152 F.3d at
1187. We have described this as the FAAAA’s “principal
purpose,” namely, “prevent[ing] States from undermining
federal deregulation of interstate trucking through a
patchwork of state regulations” – with Congress particularly
concerned about States enacting “barriers to entry, tariffs,
price regulations, and laws governing the types of
commodities that a carrier could transport.” Dilts, 769 F.3d
at 644 (citations and internal quotation marks omitted).

We have also detailed what was not intended by the
FAAAA. “Congress did not intend to preempt generally
applicable state transportation, safety, welfare, or business
rules that do not otherwise regulate prices, routes, or
services.” Id. Rather, its “driving concern” was preventing
States from replacing market forces with their own, varied
commands, like telling carriers they had to provide services
not yet offered in the marketplace. See Dan’s City, 569 U.S.
at 263–64. Thus, when assessing preemption, we are
cognizant that, “[a]lthough Congress clearly intended
FAAAA to preempt some state regulations of motor carriers
who transport property, the scope of the pre-emption must be
tempered by the presumption against the pre-emption of state
police power regulations.” Dilts, 769 F.3d at 643 (citation
omitted). To this end, we have held that Congress did not
intend to preempt laws that implement California’s traditional
12 CAL. TRUCKING ASS’N V. SU

labor protection powers, and which affect carriers’ rates,
routes, or services in only tenuous ways. Dilts, 769 F.3d at
647–50 (meal and rest break laws); Mendonca, 152 F.3d at
1189 (prevailing wage law).

B. The FAAAA Does Not Preempt the Borello Standard

With our task and that background in mind, we turn to
assessing whether the Commissioner’s use of the Borello
standard has significant, and therefore preempted, impact or
only tenuous impact on a carrier’s prices, routes or service.
Relying heavily on Supreme Court precedent, CTA contends
that the FAAAA preempts the Borello standard because the
Commissioner’s use of it can replace freely-bargained,
efficiency-driven contract terms with California’s policy
judgment about what those terms ought to be.

True, the Supreme Court has held state laws preempted
when a customer invokes them to obtain certain rates or
services beyond what was set forth in their contract with a
carrier. See generally Northwest, Inc. v. Ginsberg, 572 U.S.
273, 134 S. Ct. 1422 (2014); Am. Airlines, Inc. v. Wolens,
513 U.S. 219 (1995). However, those cases did not announce
a broad rule that preemption occurs whenever a state law
touches any aspect of a carrier’s contractual relationship with
anyone. Instead, we have made clear that those cases are
inapplicable, and so no preemption occurs, when the law is a
generally applicable background regulation in an area of
traditional state power that has no significant impact on a
carrier’s prices, routes, or services. See Dilts, 769 F.3d at
642–50; Mendonca, 152 F.3d at 1185–89. Despite CTA’s
arguments to the contrary, Dilts and Mendonca compel us to
conclude that the Borello standard is not preempted. And this
 CAL. TRUCKING ASS’N V. SU 13

conclusion finds support in the FAAAA’s legislative history,
as well as the California Supreme Court’s view of the matter.

1. Interference with Customer Contracts at the Point
of Sale

We begin with the Supreme Court decisions holding
preempted state laws that interfered with a carrier’s
contractual relationship with its customers – on which CTA
heavily relies. See Ginsberg, 134 S. Ct. at 1428–33; Wolens,
513 U.S. at 226–34. These cases did not announce a rule that
preemption occurs whenever a state law effectively alters
freely-negotiated contract terms; the preemption issues they
addressed were, instead, quite distinct from the issue here.

In both Ginsberg and Wolens, customers objected to
changes that an airline made to its “frequent flyer” program.
Ginsberg, 134 S. Ct. at 1426–27 (objecting to being kicked
out of frequent flyer program); Wolens, 513 U.S. at 224–25
(objecting to retroactive changes that devalued frequent flyer
credits). The customers pointed to state laws, arguing that
these laws compelled the air carrier to provide specific prices
or services – like making flights or upgrades available on
certain dates or for certain credit amounts – even if such
obligations were absent from the parties’ agreements.
Ginsberg, 134 S. Ct. at 1431–33 (addressing a claim for
breach of the covenant of good faith and fair dealing);
Wolens, 513 U.S. at 226–27 (reviewing a consumer fraud act
claim). In both cases, the Supreme Court held that the
FAAAA preempted these state law claims because they
would have resulted in a State’s normative policies dictating
what prices and services an airline had to offer to its
customers. Ginsberg, 134 S. Ct. at 1431–33; Wolens,
14 CAL. TRUCKING ASS’N V. SU

513 U.S. at 227–28.6 Customers’ breach of contract claims
that sought merely to hold an airline to agreed-upon terms,
however, were not preempted. Wolens, 513 U.S. at 230–33.

CTA emphasizes that the line drawn is “between what the
State dictates and what the [carrier] itself undertakes.”
Wolens, 513 U.S. at 233. As explained in Wolens, a breach
of contract claim against a carrier is cognizable because it
enforces only the latter “with no enlargement or enhancement
based on state laws or policies external to the agreement.”
Id.; see also id. at 228–29 & n.5. Moreover, permitting such
claims against carriers aligns with the ADA’s goal of
promoting reliance on market forces because “[m]arket
efficiency requires effective means to enforce private
agreements.” Id. at 230. CTA urges us to focus on the fact
that the Borello standard could replace efficiency-driven
terms in its members’ contracts with external ones found in
California’s labor laws (e.g., sua sponte reallocating
responsibility for truck maintenance costs from owner-
operators to carriers).

CTA’s focus on this delineation in the broadest sense
misses the trees for the forest – and does not square with our
task of assessing whether Congress clearly intended to
preempt Borello by analyzing its effect on prices, routes, and
services. It is one thing to say market efficiencies are
promoted when competitive forces compel a carrier to offer

6
The results in Wolens and Ginsberg flowed logically from Morales,
which held that the ADA preempted States from using their general
consumer protection statutes to combat deceptive airline advertisements.
See 504 U.S. at 387–91. The States sought to use those statutes to enforce
guidelines that mandated the content of airfare advertisements, and the
prices and services an airline had to make available once it advertised
certain fares. See id.
 CAL. TRUCKING ASS’N V. SU 15

certain services or prices, and a customer can then enforce
these promises – but only these promises. See Hickcox-
Huffman v. US Airways, Inc., 855 F.3d 1057, 1066 (9th Cir.
2017) (ruling that the ADA did not preempt breach of
contract claim where airline freely undertook obligation to
offer timely delivery of baggage). It does not follow that a
state law will be preempted in every instance where it defeats
any term in any carrier contract. Even if Wolens and
Ginsberg draw a line between the permissible enforcement of
contractual terms and the preempted enforcement of
normative policies, that line does not control when the
contractual relationship is between a carrier and its
workforce, and the impact is on the protections afforded to
that workforce.

2. Impacting Workforce Arrangements

Indeed, we have already explained that the details of
Wolens and Ginsberg matter because Congress did not intend
to hinder States from imposing normative policies on motor
carriers as employers. See Dilts, 769 F.3d at 642–50;
Mendonca. 152 F.3d at 1187–89. And Dilts and Mendonca
all but dictate the result here.7

Mendonca held that California’s Prevailing Wage Law
(CPWL) is not preempted, 152 F.3d at 1187–89, and Dilts
later held that California’s meal and rest break requirements
are not preempted, 769 F.3d at 642–50. In effect, the laws at-
issue in these cases compelled new terms in motor carriers’
agreements with their workers. To be sure, in Dilts and

7
Mendonca was decided between Wolens and Ginsberg; Dilts was
decided after both, and confirmed Mendonca’s continued vitality.
769 F.3d at 645.
16 CAL. TRUCKING ASS’N V. SU

Mendonca there was no dispute that the workers were
employees. Still, we permitted California to interfere with
the relationship between a motor carrier and its workforce.
Dilts explicitly distinguished Wolens and Ginsberg based on
where and how this interference occurs:

Laws are more likely to be preempted when
they operate at the point where carriers
provide services to customers at specific
prices.

...

On the other hand, generally applicable
background regulations that are several steps
removed from prices, routes, or services, such
as prevailing wage laws or safety regulations,
are not preempted, even if employers must
factor those provisions into their decisions
about the prices that they set, the routes that
they use, or the services that they provide.
Such laws are not preempted even if they raise
the overall cost of doing business or require a
carrier to re-direct or reroute some
equipment. . . . Nearly every form of state
regulation carries some cost. The statutory
text tells us, though, that in deregulating
motor carriers and promoting maximum
reliance on market forces, Congress did not
intend to exempt motor carriers from every
state regulatory scheme of general
applicability.
 CAL. TRUCKING ASS’N V. SU 17

769 F.3d at 646 (citations omitted). We agree with the
Commissioner that, in light of Dilts and Mendonca, CTA’s
position “defies logic.” Our conclusion that Congress did not
intend to preempt these generally applicable labor laws could
be nullified if motor carriers have the unchecked ability to
contract around these laws simply by obtaining owner-
operators’ consent to label them as independent contractors
and thus exclude them from such protections.8

Similarly instructive is Air Transport Ass’n of America
v. City and County of San Francisco, 266 F.3d 1064, 1070–75
(9th Cir. 2001), where we concluded that the ADA did not
preempt a San Francisco ordinance barring city contractors
from discriminating, even though it affected air carriers at
San Francisco International Airport and could have increased
their cost of doing business at that airport. The ordinance had
the effect of “adding a contractual requirement” that
interfered with an air carrier’s relationship with its workforce
because, for example, if it offered certain terms to an
employee’s spouse, it was compelled to provide the same
benefits to another employee’s domestic partner. Id. at 1069,
1073. What mattered, however, was that the ordinance did
not constitute improper compulsion in the preemption sense.
Id. at 1074. As we framed the inquiry there, “[t]he question
is not whether the Ordinance compels or binds them into not
discriminating; the question is whether the Ordinance
compels or binds them to a particular price, route or service.”
Id.

8
For example, CTA does not refute the Commissioner’s claim that
the Labor Code prevents an employee from waiving rest breaks or the
right to be reimbursed for business expenses. See Cal. Labor Code
§§ 219, 1194, 2804.
18 CAL. TRUCKING ASS’N V. SU

3. The Borello Standard’s Impact on Workforce
Arrangements

CTA contends that, nonetheless, if we look at the specific
effects the Borello standard has on its members here, we will
see that there is improper compulsion in the preemption
sense. We reject this contention because the Borello standard
does not compel the use of employees or independent
contractors; instead, at most, it impacts CTA’s members in
ways that Dilts and Mendonca make clear are not significant,
and so do not warrant preemption.

a. Compelling Who Provides Services

CTA argues that a state law or policy compelling a carrier
to use employees to provide its services is preempted. Even
so, the Borello standard does not, by its terms, compel a
carrier to use an employee or an independent contractor. Nor
does CTA contend that the nature of the Borello standard
compels the use of employees to provide certain carriage
services.

This case is therefore wholly different from American
Trucking. See 559 F.3d at 1053–57. There, in reversing the
denial of a preliminary injunction, we concluded that the
FAAAA likely preempted the Ports of Los Angeles and Long
Beach’s directive that carriers must use only employee
drivers and give hiring preference to drivers with more
experience. Id. As compared to the Borello standard, which
sets a background rule for ensuring a driver is correctly
classified, American Trucking stands for the obvious
proposition that an “all or nothing” rule requiring services be
performed by certain types of employee drivers and
 CAL. TRUCKING ASS’N V. SU 19

motivated by a State’s own efficiency and environmental
goals was likely preempted. Id. at 1053–56.

For similar reasons, it is immaterial that other States have
adopted the “ABC” test to classify workers, the application of
which courts have then held to be preempted. See Schwann
v. FedEx Ground Package Sys., Inc., 813 F.3d 429, 437–40
(1st Cir. 2016) (analyzing Massachusetts law). Like
American Trucking, the “ABC” test may effectively compel
a motor carrier to use employees for certain services because,
under the “ABC” test, a worker providing a service within an
employer’s usual course of business will never be considered
an independent contractor. Id at 438. For a motor carrier
company, this means it may be difficult to classify drivers
providing carriage services as independent contractors. Id. at
439. But California’s common law test – as embodied in the
Borello standard – is to the contrary. Whether the work fits
within the usual course of an employer’s business is one
factor among many – and not even the most important one.
See Borello, 769 P.2d at 404.9 CTA has not alleged or shown
how the Borello standard makes it difficult for its members to
use independent contractors to provide their services.

9
The First Circuit left in place the two other “prongs” of the “ABC”
test, which align more closely with the Borello standard. See 813 F.3d at
433, 441 (classification depends on level of control and whether individual
is regularly engaged in service being provided). The carrier in that case
did not argue that those elements of the “ABC” test were preempted. See
id. at 441. As previously discussed, we need not and do not decide
whether the FAAAA would preempt using the “ABC” test to enforce labor
protections under California law. See footnote 4 supra.
20 CAL. TRUCKING ASS’N V. SU

b. Compelling or Foreclosing Prices, Routes, or
Services

CTA also argues for preemption because of the potential
impact on a motor carriers’ financial arrangements with its
drivers and their agreed-upon incentives; again, Dilts and
Mendonca foreclose these arguments.

Specifically, CTA complains that, whereas owner-
operators often control how their trucks are used and can
accept or reject hauls offered by the carriers they are working
with, an employee driver must accept a haul or face
termination. In the relevant agreements, owner-operators are
also responsible for expenses like maintenance, repair,
parking, and fueling and then compensated at an agreed-upon
rate; however, California law requires motor carriers to
reimburse employee drivers for these expenses.

In Mendonca, we rejected similar arguments that CPWL
was preempted because it would increase a carrier’s prices by
25%, require it to change how it offered these services (e.g.,
using independent owner-operators), and compel it to redirect
and reroute equipment to compensate for lost revenue.
152 F.3d at 1189. Mendonca acknowledged that CPWL
related to prices, routes, and services “in a certain sense,” but
relied on the Supreme Court’s efforts in this arena “to
preserve the proper and legitimate balance between federal
and state authority.” Id. Because CPWL was an area of
traditional state regulation that did not “acutely interfer[e]
with the forces of competition,” it was not preempted. Id.

The question in Dilts was whether meal and rest break
laws – either directly or indirectly – set prices, mandated or
prohibited certain routes, or told motor carriers what services
 CAL. TRUCKING ASS’N V. SU 21

they could or could not provide. 769 F.3d at 647. The
answer was no. Id. at 647–50. Dilts recognized that a motor
carrier may have to hire more workers in order to stagger
breaks and operate continuously. Id. at 648. Rest breaks
could also result in drivers taking longer to travel the same
distance, meaning motor carriers would need to reallocate
resources or face increased costs, like hiring more drivers, to
maintain a particular service level. Id. And motor carriers
would need to take drivers’ breaks into consideration when
scheduling services. Id. There still was no preemption –
even though motor carriers would have to arrange operations
and services based on what the law requires, and not only on
what the market demands. See id. at 648–50.

The specific effects CTA discusses – such as reallocation
of truck maintenance costs and a potential change in who sets
drivers’ hours – are indistinguishable from those recognized
as permissible in Dilts and Mendonca. There is no allegation
that if a current driver is found to be an employee, CTA’s
members will no longer be able to provide the service it was
once providing through that driver, or that the route or price
of that service will be compelled to change. At most, carriers
will face modest increases in business costs, or will have to
take the Borello standard and its impact on labor laws into
account when arranging operations. “[T]he mere fact that a
motor carrier must take into account a state regulation when
planning services is not sufficient to require FAAAA
preemption, so long as the law does not have an
impermissible effect, such as binding motor carriers to
specific services, making the continued provision of
particular services essential to compliance with the law, or
interfering at the point that a carrier provides services to its
customers.” Dilts, 769 F.3d at 649 (citations omitted).
22 CAL. TRUCKING ASS’N V. SU

Nothing in CTA’s Complaint suggests that application of the
Borello standard will have these effects.

c. Generally Applicable Labor Protections

Rather than explain why Dilts and Mendonca do not
control, CTA attempts to undercut their reasoning by arguing
that it is improper to focus on the fact that the Borello
standard applies across all industries in an area traditionally
reserved to the States. The laws at issue in Dilts and
Mendonca involved generally applicable labor protections,
i.e., an area of traditional state power, and this factor was
critical in these cases – as it is here. See, e.g., Dilts, 769 F.3d
at 642–43. Aside from the fact that we are bound by Dilts
and Mendonca, CTA’s argument is also unavailing because
it misapprehends the authority on which it relies. See Rowe,
552 U.S. at 374; see also Morales, 504 U.S. at 386.

In Rowe, carriers hauling tobacco products risked liability
under a Maine law unless they provided certain receipt and
delivery verification services, like ensuring that the individual
who purchased and received the tobacco was of legal age and
that entities sending packages marked as containing tobacco
were Maine-licensed tobacco retailers. 552 U.S. at 368–69,
372–73. Rowe reflects a straightforward application of
FAAAA preemption: Maine could not require motor carriers
to provide these tobacco-focused carriage services, which
carriers may not have provided – or may have gotten rid of –
if left unregulated. Id. at 372–73. In so holding, Rowe
rejected Maine’s argument that the importance of preventing
underage smoking and promoting public health justified an
exception to FAAAA preemption. Id. at 374–76. As Dilts
observed, a law reflecting a State’s traditional police power
will not be immune from preemption “if Congress in fact
 CAL. TRUCKING ASS’N V. SU 23

contemplated [its] preemption.” 769 F.3d at 643; accord
Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 946 (2016).

The Commissioner, however, is not seeking an exception
to preemption; she argues there is no preemption in the first
place because there is no clear intent to usurp the well-
established test for triggering a State’s traditional labor
protection powers. In Rowe, Maine targeted only the carriage
of tobacco products, enlisting motor carriers to accomplish its
public health goals by telling carriers how to complete
tobacco pick-up and delivery within that State. Id. at 373–75.
To the contrary, the Borello standard is more comparable to
a state regulation that Rowe described as not preempted,
namely, one that “broadly prohibits certain forms of conduct
and affects, say, truckdrivers, only in their capacity as
members of the public . . . .” 552 U.S. at 375.

This is not to say that the general applicability of a law is,
in and of itself, sufficient to show it is not preempted. See
Morales, 504 U.S. at 386. While general applicability is not
dispositive, Dilts and Rowe still instruct that it is a relevant
consideration because it will likely influence whether the
effect on prices, routes, and services is tenuous or significant.
What matters is not solely that the law is generally applicable,
but where in the chain of a motor carrier’s business it is
acting to compel a certain result (e.g., consumer or
workforce) and what result it is compelling (e.g., a certain
wage, non-discrimination, a specific system of delivery, a
specific person to perform the delivery). As we have already
detailed, CTA’s Complaint is devoid of any allegations that
could demonstrate that the Commissioner’s application of the
Borello standard, in any significant way, impacts its
members’ prices, routes, or services.
24 CAL. TRUCKING ASS’N V. SU

4. Historical Context and Preemption in the Present

Our conclusion today brings us in accord with the
California Supreme Court – and, as that court discussed,
Congress’ intent for the FAAAA’s preemptive reach. See
generally People ex rel. Harris v. Pac Anchor Transp., Inc.,
329 P.3d 180 (Cal. 2014).

Pac Anchor held that the FAAAA did not preempt a claim
under California’s Unfair Competition Law (“UCL”), Cal.
Bus. & Prof. Code § 17200 et seq., premised on drivers being
misclassified as independent contractors. Id. at 187–90. As
with the Commissioner’s use of the Borello standard, the
UCL claim sought only “to ensure that employers properly
classify their employees or independent contractors in order
to conform to state law.” Id. at 190.

Pac Anchor relied on Mendonca’s discussion of indirect
evidence of Congress’ intent, which we find persuasive. See
id. When enacting the FAAAA, Congress identified ten
jurisdictions (nine States and the District of Columbia
(“States”)) that did not regulate intrastate prices, routes, and
services. See Mendonca, 152 F.3d at 1187 (citing H.R. Conf.
Rep. 103-677, at 86 (1994), reprinted in 1994 U.S.C.C.A.N.
1715, 1758). Because seven of these ten States had
prevailing wage laws similar to CPWL, this was “indirect
evidence” Congress did not intend to preempt that law –
which was reinforced by the fact that there was no “positive
indication in the legislative history that Congress intended
 CAL. TRUCKING ASS’N V. SU 25

preemption in this area of traditional state power.” Id. at
1187–88.10

As relevant here, eight out of the ten States that Congress
initially identified had laws for differentiating between an
employee and an independent contractor. Pac Anchor,
329 P.3d at 190. Moreover, nothing in the FAAAA’s
legislative history indicated that Congress intended to
preempt the traditional power to protect employees or the
necessary precursor to that power, i.e., identifying who is
protected. See id. This indirect evidence provides further
support that Congress did not intend to foreclose States from
applying common law tests to discern who is entitled to
generally applicable labor protections.11 For these additional
reasons, then, we conclude that the FAAAA does not bar the
Commissioner’s application of the Borello standard to claims
within her jurisdiction involving motor carriers.

CONCLUSION

The FAAAA does not preempt the Commissioner from
using the Borello standard with respect to motor carriers

10
While Rowe discredited reliance on this type of evidence of indirect
intent, it did so in the context of rejecting a public health exception for
Maine’s law that directly regulated carrier services. 552 U.S. at 374–75.
Such an exception would have been contrary to the FAAAA’s purpose of
avoiding “a patchwork of state service-determining laws” regulating how
to carry certain products. Id. at 373–75. Again, the Commissioner is not
arguing for an exception. And Dilts confirmed that Rowe did not call
Mendonca into question. 769 F.3d at 645.
11
Even if the relevant tests vary across States, Dilts instructs that this
would be a “permissible” patchwork under the FAAAA. See 769 F.3d at
647–48 & n.2.
26 CAL. TRUCKING ASS’N V. SU

because this generally applicable, common law test is not
“related to” motor carriers’ prices, routes, or services.
Accordingly, we affirm the district court’s order of dismissal.

AFFIRMED.