California Meal and Rest Break Laws Are Not Preempted by the FAAAA: Ninth Circuit

In Dilts v. Penske Logistics, LLC, the US Court of Appeals for the Ninth Circuit reversed and remanded the district court's holding that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempts California's meal and rest break laws (Cal. Lab.Code §§ 226.7, 512; Cal.Code Regs. tit. 8, § 11090) as applied to motor carriers. The Ninth Circuit held that the California meal and rest break laws are not related to prices, routes or services, and are therefore not preempted by the FAAAA. In light of the Dilts decision, the same day the Ninth Circuit issued a memorandum disposition in Campbell v. Vitran Express, Inc., the court once again reversed and remanded the district court's holding on the same issue as Dilts, and similarly held that California's meal and rest break laws, as applied to motor carriers, are not preempted under the FAAAA.

Practical Law Labor & Employment

On July 9, 2014, in Dilts v. Penske Logistics, LLC, the US Court of Appeals for the Ninth Circuit reversed and remanded the district court's holding that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempts California's meal and rest break laws as applied to motor carriers. The Ninth Circuit held that the California meal and rest break laws at issue are not related to prices, routes or services, and are therefore not preempted by the FAAAA. (12-55705, 2014 WL 3291749 (9th Cir. July 9, 2014).)

In light of the holding in Dilts, the same day the Ninth Circuit issued a memorandum decision in Campbell v. Vitran Express, Inc. the court once again reversed and remanded the district court's holding on the same issue as in Dilts, and similarly held that California's meal and rest break laws, as applied to motor carriers, are not preempted under the FAAAA (12-56250, 2014 WL 3339179 (9th Cir. July 9, 2014)).

 

Background

Plaintiffs are a certified class of drivers employed by defendants Penske Logistics, LLC and Penske Truck Leasing Co., L.P. (defendants). Defendants are motor carriers. Plaintiffs (who represent a class of 349 delivery drivers and installers) brought a class action against defendants, alleging that defendants routinely violate the following California meal and rest break laws:

Plaintiffs initially filed this action in state court. Defendants removed the case to federal district court under the Class Action Fairness Act.

Defendants moved for summary judgment, arguing that the California meal and rest break laws as applied to motor carriers are preempted under the FAAAA. The FAAAA's preemption clause provides that:

"States may not enact or enforce a 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).)

The district court:

  • Concluded that California's meal and rest break laws impose "fairly rigid" timing requirements:

    • dictating "exactly when" and "for exactly how long" drivers must take breaks; and

    • restricting the routes that a motor carrier may select.

  • Held that California's meal and rest break laws meet the FAAAA preemption standard because they are related to price, route or service.

  • Granted summary judgment for the defendants.

(Dilts v. Penske Logistics LLC, 819 F.Supp.2d 1109 (S.D.Cal.2011).)

Plaintiffs appealed to the Ninth Circuit.

 

Outcome

The Ninth Circuit (Circuit Judge Graber) held that the FAAAA does not preempt California meal and rest break laws as applied to motor carriers because California meal and rest break laws are not sufficiently related to prices, routes or services to meet the preemption standard. The parties did not dispute that the transportation of property was involved, so the court's analysis focused on the "related to price, route or service" prong of the FAAAA preemption test.

The Ninth Circuit found that:

  • There is a presumption against the preemption of state law.

  • Even if state laws increase a motor carrier's operating costs (by increasing its cost of doing business, or impacting its routes or drivers' schedules in some way), this does not alone make these laws related to prices, routes or services.

  • If the state laws do not have any other forbidden connection with prices, routes or services (that is, they do not directly or indirectly mandate, prohibit or otherwise regulate prices, routes or services), they are not preempted by the FAAAA.

  • In light of the FAAAA preemption principles, California's meal and rest break laws plainly are not the sort of laws "related to" prices, routes or services that Congress intended to preempt because they:

    • 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;

    • are broad laws applying to hundreds of different industries with no other forbidden connection with prices, routes and services;

    • are normal background rules for almost all employers doing business in California;

    • do not bind the motor carriers to specific prices, routes or services (even though motor carriers must take them into account when allocating resources and scheduling routes); and

    • do not freeze prices, routes or services, or determine the prices, routes or services the motor carriers will provide.

  • Applying California meal and rest break laws to motor carriers would not contribute to an impermissible patchwork of state-specific laws. The fact that such laws are different in each state does not alone cause FAAAA preemption. Meal and rest break laws are more analogous to state wage laws that vary by state but are permitted and not preempted.

  • The Secretary of Transportation, in an amicus brief, argued that the California laws at issue are not preempted because:

    • they do not directly regulate prices, routes or services, and do not have a "significant effect" on prices, routes or services;

    • if there are no explicit instructions from Congress, there is a presumption against preemption in areas of traditional state police power, including employment; and

    • there is no showing of an actual or likely significant effect on prices, routes or services.

  • Although the Secretary of Transportation's position is not controlling, it does deserve weight because of the agency's expertise in transportation and regulation, its reasoned consideration of the question and its consistency when dealing with preemption questions concerning California meal and rest break laws. It is especially persuasive that the Department of Transportation sees no evidence that California's meal and rest break laws will significantly affect the prices, routes or services of motor carriers.

District Judge Zouhary concurred but wrote separately to emphasize his opinion that the defendant failed to carry its burden on its preemption defense.

Update: On September 8, 2014, in Dilts v. Penske Logistics, LLC, the Ninth Circuit filed an order and amended opinion, denying Penske’s petition for an en banc rehearing of the court’s previous ruling from July 9, 2014, which stated that the FAAAA does not preempt California's meal and rest break laws as applied to motor carriers because meal and rest breaks are not sufficiently related to prices, routes or services to bring them under the FAAAA’s pre-emption clause. As a result of this order, the Ninth Circuit maintained its reversal of the district court’s decision which had initially granted summary judgment to Penske on the basis that the California laws were preempted by the FAAAA. (No. 12-55705, 2014 WL 4401243 (9th Cir. Sept. 8, 2014).)

 

Practical Implications

This decision is important because it is the first time that the Ninth Circuit has considered the question of FAAAA preemption of California wage and hour laws. The decision shows that motor carrier employers cannot rely on the defense that state wage and hour laws are preempted by the FAAAA and therefore must comply with all applicable wage and hour laws in the states where they operate. Claims of preemption by employers in other regulated industries, including the claims raised in numerous district court decisions decided before Dilts, likely will be impacted by the Ninth Circuit's rulings as well.

 
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