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July 24, 2014

9th Circuit Holds the FAAAA does not Preempt California’s Meal and Rest Period Laws

On July 9, 2014, the 9th Circuit held that California meal and rest period laws were not sufficiently related to prices, routes, and services to be preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”).  Dilts v. Penske Logistics. 

Plaintiffs brought a class action against Penske alleging that Penske failed to comply with California’s overtime, and meal and rest period requirements.  Plaintiffs represented a certified class of 349 delivery drivers and installers, who alleged they worked over 10 hours per day, and generally worked in pairs with one driver and one installer in each truck.  The employees alleged that Penske assumed that the employees were taking their meal and rest periods but simultaneously created an environment that discouraged the employees from doing so.  Penske responded by arguing that the FAAAA preempted California’s meal and rest period laws for transportation workers.

The court explained the original intent of the FAAAA: to prevent states from undermining the federal goal of deregulating the interstate trucking industry.  The court observed that in order to prevent state legislatures from overriding the federal objective of deregulation, the FAAAA was designed to preempt state laws that are “significantly related to rates, routes, or services, even if indirectly.”  
While the 9th Circuit held that the question before it was “not close,” the issue presented with respect to mandatory meal and rest periods raises statutory benefit issues largely unique to California.  Writing for the majority, Judge Graber explained that California’s meal and rest period laws do not mandate or prohibit certain routes, or compel motor carriers to act in some specific way with respect to the services they provide.  The court specifically rejected the argument that meal and rest period requirements affect prices, routes, and services by forcing companies to adjust to them in setting certain prices, routes, and services.  The court noted that meal and rest period laws are “broad laws applying to hundreds of different industries with no other forbidden connection with prices, routes, and services,” and are “normal background rules for almost all employers.”  Such laws, according to the court, are not the sort of “directly related” laws that Congress sought to preempt with the FAAAA.

What this means for employers:
Transportation employers in California battling meal and rest period and other wage and hour complaints have one less defense in their arsenal after this decision.  Employers with workers in the transportation industry need to make sure their meal and rest period policies and practices strictly comply with, and echo the Industrial Welfare Commission Wage Order 9.  

There is no indication yet as to whether the decision will be appealed to the Supreme Court.  FAAAA preemption remains a live issue in other wage and hour cases before California courts as well as in other matters in litigation elsewhere in the country.  Two cases, Rodriguez v. RWA Trucking Company, Inc., and Harris v. Pac Anchor Transp., Inc. are currently pending before the California Supreme Court on related FAAAA pre-emption arguments.  At issue in those cases is whether the FAAAA pre-empts California’s Unfair Competition Law with regard to trucking industry employees classified as independent contractors.  A case is also pending in the First Circuit Court of Appeals, Massachusetts Delivery Association v. Martha Coakley, on the FAAAA pre-emption issue.  In that case, the Massachusetts Delivery Association challenged a Massachusetts law that requires companies to provide independent contractors with the same wages and benefits as those given to employees.

Also recently decided was the case of Sanchez v. Lasership, Inc. (E.D. Va. 2013), where a Massachusetts statute that attempted to redefine “independent contractor” to only include those who perform services “outside the usual course of business of the employer” was challenged.  The court found that such a redefinition would have a major impact on the business models of transportation companies, and was thus preempted by the FAAAA.

Conflicting decisions abound, and decisions are expected soon in the above cases.  It will be interesting to see how much of an impact the Dilts case will have on those other courts’ decisions.  Should a split arise between the different Circuits of Appeal, the issue may work its way to the U.S. Supreme Court.


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