People ex rel. Harris v. Pac Anchor Transportation: FAAAA Does Not Preempt UCL Action Based on State Insurance and Wage Law

The California Supreme Court has announced its decision in People ex rel. Harris v. Pac Anchor Transportation, Inc. (7/28/14) --- Cal.4th ---. In Harris, the State of California alleged that the defendants misclassified truck drivers as independent contractors, thus denying them protections that state insurance and wage laws provide to employees, including the right to itemized wage statements. The issue, as described by the Court, is as follows:

Whether an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (UCL) that is based on a trucking company’s alleged violation of state labor and insurance laws is “related to a price, route or service” (49 U.S.C. § 14501 (c)(1)) of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (Pub.L. No. 103-305 (Aug. 23, 1994) 108 Stat. 1569) (FAAAA).

The defendants made two preemption arguments. First, they argued that the FAAAA facially preempts all UCL claims against motor carriers. Second, they argued that the particular UCL claims at issue were preempted as applied to this case.

The Court rejected both arguments on essentially the same grounds. The Court held that the FAAAA does not preempt an action based on a trucking company’s alleged general violations of state labor and insurance laws. Such state laws do not focus on motor carriers, but regulate employer practices generally. They are "laws of general application whose effects on carriers' prices, routes, and services is remote." Even IWC Wage Order No. 9, which regulates the transportation industry, is not preempted because any effect on prices, routes, or services is indirect.

The opinion is available here.