On Wednesday, the United States Ninth Circuit Court of Appeals rendered a decision that, on its face, involved a technical preemption issue, but one that will have serious repercussions for those in the transportation industry operating in California. In plain terms, the question was whether California’s detailed meal and rest break requirements conflict with a federal statute barring states from regulating the prices, routes and services of motor carriers and airlines.
Over the past few years, California district courts have varied as to whether motor carriers must follow California meal and rest break laws, or whether the Federal Aviation Administration Authorization Act of 1994 (“FAAA Act” or the “Act”) preempts California law in this regard. On July 9, 2014, in Dilts v. Penske Logistics, LLC, the Ninth Circuit decided, for the first time, that such preemption generally does not apply. Nevertheless, the possibility remains open that, in a future case, a motor carrier (particularly a long haul carrier) or airline may offer stronger evidence of and arguments for preemption.
Under the FAAA Act, in most instances 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 service of any motor carrier... or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The Act was passed “‘to prevent States from undermining federal deregulation of interstate trucking’ through a ‘patchwork’ of state regulations.”
In Dilts, the plaintiffs sought to represent a class of hourly appliance delivery drivers and installers, working exclusively within California and on short-haul routes. They argued that they were unable to take the California-mandated meal and rest periods, and sought to assert the usual array of California wage and hour claims as a result. The lower court found that because California’s rest and meal period requirements so severely affected trucking prices, routes, and services, they were preempted by the FAAA Act, and it granted summary judgment in the employer’s favor.
After finding a strong presumption against preemption, the Ninth Circuit stated that while the FAAA Act’s “related to” language is deliberately expansive and broad, it does not preempt state laws that affect prices, routes, or services in only a tenuous way. It concluded that where a law does not refer directly to rates, routes, or services, “the proper inquiry is whether the provision, directly or indirectly, binds the carrier to a particular price, route or service and thereby interferes with the competitive market forces within the industry.”
The Ninth Circuit held that California break laws do not, in either a direct or indirect way, set prices, mandate or prohibit certain routes, or force motor carriers to provide or not provide certain services. While motor carriers may have to account for meal and rest break requirements when scheduling routes, including potentially reallocating resources, the court held that the break laws do not bind motor carrier to specific prices, routes, or services to a significant degree.
This holding was likely wrong as carriers must deal with a myriad of logistics and timing issues, including pricing based on delivery time and speed, and having to schedule and staff to account for rest and meal periods. This is further complicated by both legal and practical issues that carriers often cannot control, such as traffic delays and other limitations that vary based on the type of truck being used. All of these tasks must be performed in a highly rate-competitive marketplace, and thus, California break laws do, indeed, have the “force and effect” of relating to the prices, routes, and services a carrier provides.
However, the court left open the issue of whether a federal law can ever preempt a state law on an “as applied” basis, or in other words, whether federal law can sometimes preempt a state law, but not at other times. In that regard, the court was somewhat dismissive of the employer’s arguments regarding the difficulties of scheduling breaks, the impact on staffing, and the inevitable influence on rates. Both the majority and concurring decisions were unconvinced by Penske’s evidence, or lack thereof, that finding routes which would allow drivers to comply with California’s break laws would limit motor carriers to a smaller set of possible routes.
The Bottom Line: The Ninth Circuit has rejected, at least on one set of facts, the application of FAAA Act preemption to California’s meal and rest period requirements in the transportation industry, but a better developed factual record might lead to a different conclusion.