Third Circuit Court of Appeals Rules Truckers’ Wage Deduction Class Action is Not Preempted by Federal Law

On September 27, 2018, a three-judge panel of the Third Circuit Court of Appeals affirmed the District Court for the District of New Jersey’s holding denying the defendant employer’s motion to dismiss the plaintiff truck drivers’ claims based on federal preemption, in Lupian v. Joseph Cory Holdings LLC.

Five truck drivers filed the lawsuit against their employer, Joseph Cory Holdings LLC, as a class action pursuant to the Class Action Fairness Act of 2005 (“CAFA”) alleging that the company deducted wages from drivers’ paychecks for items such as uniforms, insurance, and goods damaged in transit, without their contemporaneous consent, in violation of the Illinois Wage Payment and Collection Act (“IWPCA”).

While the drivers’ contracts with the company purported to create an independent contractor relationship, the drivers claimed the realities of their relationship with the company created an employer-employee relationship under the IWPCA. The IWPCA defines an employee as “a person who is permitted to work by an employer.” It should be noted that this is similar to the New Jersey Wage and Hour Law, which defines the term “employ” as “to suffer or permit to work.”

The company moved to dismiss the lawsuit, arguing that the truckers’ claims under the IWPCA were preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The FAAAA contains a preemption provision that applies to the trucking industry, which states, “a State, political division of a State, or a political authority of 2 or more States 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.”

The district court denied the motion, holding that the connection between the subject matter of IWPCA and that of the FAAAA was not strong enough to trigger preemption. The company appealed to the Third Circuit Court of Appeals.

The Third Circuit Court of Appeals affirmed, holding that, “the IWPCA does not have a significant impact on carrier rates, routes, or services of a motor carrier and does not frustrate the FAAAA's deregulatory objectives, as the impact of the IWPCA is too tenuous, remote, and peripheral to fall within the scope of the FAAAA preemption clause.”

The court reasoned that wage laws like the IWPCA are a traditional area of state regulation, like zoning laws, that affect all types of businesses equally, and do not single out trucking companies. Because wage laws like the IWPCA regulate the relationship between companies and their employees, not between companies and customers, it demonstrates that the purpose and effect of the IWPCA are not sufficiently similar to the type of regulations the FAAAA sought to prohibit.

We will monitor future developments in this litigation.