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AB5 passage upends California’s independent trucking model

Truckers may seek work in other states if bill is signed. Credit: Jim Allen/FreightWaves

Lawmakers in California’s Senate have approved legislation that many independent truck drivers fear will drive a stake through their business, forcing them to shut down or move to another state.

The “Employees and Independent Contractors” bill, known as AB5, passed the Senate on September 10 by a vote of 29-11 without a carveout amendment for freight-hauling owner-operators. The bill, if signed into law by California Governor Gavin Newsom, is intended to protect workers employed in the so-called “gig” economy economy – such as with ridesharing companies Uber and Lyft – from being exploited by being denied certain wage and healthcare benefits.

But the bill will also make it virtually impossible for two trucking companies to contract together, according to owner-operator representatives, thereby imposing significant liabilities on companies that contract with owner-operators.

“AB5 could have been amended to address worker misclassification issues, as well as protect the 70,000 predominantly minority-owned truckers currently operating as independent contractors,” said Shawn Yadon, CEO of the California Trucking Association (CTA). “There is no reason why protecting workers does not include defending the right of tens of thousands of drivers who have built their businesses around the independent owner-operator model, invested hundreds of thousands of dollars in their trucks and have operated their own businesses for decades.”

Yadon said that fallout from the legislation could mean tens of thousands of owner-operator truckers in agriculture, retail and other sectors will go out of business. The implications could also extend beyond employer misclassification and into driver supply and demand, he said.

“Like the rest of the nation, California is experiencing a shortage of truck drivers. This measure will aggravate the problem by removing thousands of drivers from rosters as many have indicated they will move to other states or seek a different line of work all together.”

AB5, which passed the California Assembly in May, codifies the provisions of a 2018 California Supreme Court decision, Dynamex Operations West Inc. v. Superior Court of Los Angeles, which established a new test for classifying workers. 

The decision was notable for its so-called “ABC test,” three provisions that the court said should be used to determine if a worker is an employee or an independent contractor. It is the “B” prong of that test that throws a wrench into the trucking owner-operator model, because it is being interpreted by the industry as meaning a trucking company could not hire an independent owner-operator or a driver on lease and consider them a contractor.

Labor applauds decision

The reaction from CTA and others that represent freight-hauling independent contractors contrasts with that of the International Brotherhood of Teamsters. The union considers passage of the bill a win in its fight to organize port drayage drivers, who it claims are exploited by employers through misclassification.

Teamsters considers passage a win in fight to organize port drivers.
Credit: Jim Allen/FreightWaves

“Misclassification is an attempt to weaken the power of workers, including the thousands of truck drivers in California who deserve a living wage and full rights as employees,” said Teamsters General President Jim Hoffa.

“With this vote, the California Senate has taken a strong stand with workers who should earn a living wage and have the protections to which they are entitled.”

The union noted that port truck drivers working at NFI/Cal Cartage in Southern California, which has been the target of the union over the past year, went on an “unfair labor practices” strike at the Port of Los Angeles. Drivers at the port and at the adjacent Port of Long Beach have been challenging their misclassification as “independent contractors” and exercising their rights as employees, according to the Teamsters.

Holding out hope

The Western States Trucking Association (WSTA), which had fought for a trucking carve-out alongside CTA, recently dropped its appeal in the U.S. Ninth Circuit Court of Appeals challenging the state supreme court’s Dynamex decision, arguing that it was preempted by federal law. By stepping away from the case, however, it will allow a federal lawsuit filed on behalf of CTA – which had been held in abeyance pending the outcome of WSTA’s appeal – to move forward, according to WSTA’s director of government affairs, Joe Rajkovacz.

“We were going to be appealing an adverse ruling, but the judge said he didn’t see this as a preemption issue,” Rajkovacz told FreightWaves. “The CTA case doesn’t have that issue, and the judge still has to make a decision on it. So it would certainly be more beneficial for industry to have a federal judge come up with a different ruling from the bench than what happened in our case.”

Rajkovacz added that while all indications point to Newsom signing the bill, WSTA will be asking members to contact the governor’s office before he’s obligated to sign or veto it by October 13. “It’s a last-ditch effort,” he said, “otherwise, in many respects, it will end the owner-operator model in this state as we know it.”


  1. john goit

    My dad made a good living and retired at 58 yrs old as an owner operator hauling sand and gravel. Would the rock plants have to pay his benefits with AB-5

  2. Ely

    On the week of November 4th, there will be a STATEWIDE SHUTDOWN. We ask all owner operator truck drivers to please support! We need to all unite to have something change! We can not allow AB5 to destroy us!

  3. oralia ornelas

    UNBELIEVABLE!!! You California yahoos are unbelievable with the bullshit you guys come up with. . It is clear that a owner operator is definitely a owner of his own business. He has applied for his DOT #, CA#, business license, fictitious business name, insurance, federal id#, and has bought a truck that is registered to him, yet you want to classify him as an employee. Please help me understand how with all that I just listed, is this owner operator considered to be an employee? What on earth is with you people? Where do you guys come up with this. You guys have did enough damage to the trucking industry with allowing the California Air Resource Board to adopt and enforce the most ridiculous and expensive regulation that history has ever seen. The truck and bus regulation has put many trucking companies out of business. Many companies are still struggling from the impact of this regulation. Many have had to retire most of their equipment before its useful life and forced into purchasing newer more expensive trucks in order to be compliant to operate in California. How do you regulate something you cannot contain? Now lets not forget, CARB based their decision on a report that wasn’t even written by a person with proper credentials, the lead scientist lied about holding a PHD. That goes to show how capable CARB is, yet you have them Federal standards should apply to everyone. Before you pass your bills you need to really study the impact it will have on the people of California. This is not what America stands for.

  4. W

    The politburo of the People’s Republic of Calicommia is ever goose step marching forward(?) on their agenda to become a completely communistic prefecture. All hail your supreme czar and the righteous politburo for they know what is best for you. I just wonder when you lemmings are going to be required to wear your rainbow uniforms at all times and stop to praise your “leaders” in unison on a daily basis. Just be careful where you step, the excrement you get on your shoes may be from your comrades.

    What a laughing stock your prefecture has become.

  5. JF

    So, Let me see if I can understand this, A person buys a truck, Goes through all the procedures to get licensed, permitted and insured under his own company name ( basically bought his own tools to do the job)and is offered a load to haul by another trucking company, Works for this other company off and on and this company is obligated to pay for his benefits. Oh and also make sure he’s got his expenses correct so he comes out with a healthy wage.
    Well then I guess a contractor building a truck of houses will need to do the same when he hires out subcontractors.
    Good job on moving further away from capitalism and the opportunity to create your own business.

  6. Robert W. Auger

    What I don’t understand about the author of this that he clearly is misled on driver shortage seriously guy you sound like you do not know what you’re talking about when you say there’s a driver shortage you must have never driven you must not drive and you must not pay attention to really see what’s going on out here do you just write off the fly

      1. Jason

        We aren’t short on drivers companies are recognized as cheap asses because you are all short on pay you don’t value experience because experience costs money and CEOs like getting there oversized peace of the pie so yes there is a shortage created by a lack of proper compensation and over regulatory rules

Comments are closed.

John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.