Third Circuit: FAAAA Does Not Preempt State Independent Contractor Laws

In Bedoya v. American Eagle Express Inc., the Third Circuit Court of Appeal stated that the Federal Aviation Authorization Administration Act of 1994 (FAAAA) does not preempt New Jersey’s wage and hour laws, permitting delivery drivers to continue with a suit under state wage and hour laws for improper classification as independent contractors.

The FAAAA preempts state laws related to “price, route, or service of any motor carrier … with respect to the transportation of property,” with limited exceptions.  The Third Circuit stated that the New Jersey independent contractor test does not interfere with the FAAAA’s application. Specifically, the independent contract test did not mention carrier prices, routes, or services; regulate carrier-customer interactions; bind the carrier to a particular method of providing services; or prevent carriers from using independent contractors.  Moreover, employment regulations addressing fair pay among workers are within the state’s police power, so there is a presumption against preemption by federal law.

As a result, employers must comply with state independent contractor classification laws; here, the New Jersey ABC test applies:

1. The individual has been and will continue to be free from control or direction over the performance of the service, both under contract of service and in fact; and
2. The service is either outside the usual course of the business for which such service is performed, or such service is performed outside of all the places of business of the enterprise for which such service is performed; and
3. The individual is customarily engaged in an independently established trade, occupation, profession, or business.

Employers in the Third Circuit should tread carefully when establishing independent contractor relationships and ensure that they meet all requirements.