From JDSupra, Alexander Chemers and Ryan T. Warden report that the Third Circuit Court of Appeals found that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) did not preempt New Jersey’s ABC test. Alexander and Ryan write:
Tasked with determining whether New Jersey’s ABC test was preempted by the FAAAA, the Third Circuit began by reviewing previous preemption cases. Based on that case law, the Bedoya court concluded there are two relevant questions. First, does the challenged law have a “direct impact on carriers’ prices, routes, or services”? If so, the Third Circuit reasoned that the challenged law would be preempted, unless it fell within one of the specified statutory exceptions. Second, is there a “significant effect on a carrier’s prices, routes, or services”? If so, the challenged law would be preempted, even if the impact was indirect.
The Third Circuit then laid out the analyses to be applied in determining whether a state statute has a “direct” and/or “significant” impact on prices, routes, and services:
In sum, to assess the directness of a law’s effect on prices, routes, or services, courts should examine whether the law: (1) mentions a carrier’s prices, routes, or services; (2) specifically targets carriers as opposed to all businesses; and (3) addresses the carrier-customer relationship rather than non-customer-carrier relationships (e.g., carrier-employee).
* * *
To assess whether a law has a significant effect on a carrier’s prices, routes, or services, courts should consider whether: (1) the law binds a carrier to provide or not provide a particular price, route, or service; (2) the carrier has various avenues to comply with the law; (3) the law creates a patchwork of regulation that erects barriers to entry, imposes tariffs, or restricts the goods a carrier is permitted to transport; and (4) the law existed in one of the jurisdictions Congress determined lacked laws that regulate intrastate prices, routes, or services and thus, by implication, is a law Congress found not to interfere with the FAAAA’s deregulatory goal. Other factors may also lead a court to decide that a state law has a significant effect where the law undermines Congress’ goal of having competitive market forces dictate prices, routes, or services of motor carriers. [Emphasis added.]
Application of These Standards to New Jersey’s ABC Test
Turning to the matter at hand, the Third Circuit “examined each of these considerations and conclude[d] that New Jersey’s ABC classification test is not preempted as it has neither a direct, nor an indirect, nor a significant effect on carrier prices, routes, or services.”
In finding the New Jersey test had no “direct” impact on prices, routes, or services, the Third Circuit observed that the ABC test makes no mention of carrier prices, routes, or services. Nor does the test single out carriers; it applies to all New Jersey businesses. Moreover, the Third Circuit noted that the test does not regulate carrier-customer interactions or other “production outputs,” addressing instead only employer-worker relationships. As a result, the Bedoya court found “the test is ‘steps removed’ from regulating customer-carrier interactions through prices, routes, or services.”
The Third Circuit also concluded that the New Jersey test did not have a “significant” impact on carrier prices, routes, or services. In reaching this conclusion, the Bedoya court noted that the test did not bind AEX to a particular method of providing services. On this point, the Third Circuit was careful to distinguish the New Jersey test from the Massachusetts version of the ABC test, which the First Circuit previously held was preempted by the FAAAA. Unlike the more stringent Massachusetts test, which “bound the carrier to provide its services using employees” because it “essentially foreclosed the independent contractor classification of any of the carrier’s workers,” the Third Circuit concluded that the New Jersey test does not “categorically prevent carriers from using independent contractors.” The Bedoya court then proceeded to analyze the other pertinent factors it had identified, concluding they did not support preemption under the FAAAA.