California Trucking Crisis: The Impact of Assembly Bill 5

After four and a half years of legal battles, the California Trucking Association has officially given up.

Their final statement made it clear: independent truckers in California are protesting a state labor law that has made it nearly impossible for owner-operators to work legally in the state.

As a result, 70,000 independent truckers now face a stark choice: become employees, leave the state, or break the law.

Most are choosing to leave, leading to a mass exodus from California’s trucking industry.

Major trucking companies are responding to this crisis by urging their drivers to relocate out of state immediately.

Landstar is instructing drivers to move, while Prime, Inc.

is offering relocation packages, and Night Swift has decided to drop California owner-operators entirely.

This situation has escalated beyond negotiation; it is a full-scale departure from a state that handles approximately one-third of America’s containerized imports.

The ramifications of this mass exit will soon be felt across the entire supply chain.

Most people may not be familiar with Assembly Bill 5, but if they have purchased anything that came through a California port in the past year, this law affects them directly.

It impacts store prices, delivery times, and the overall supply chain that keeps American commerce functioning.

Governor Gavin Newsom signed AB5 into law in September 2019, with the original intent of addressing the misclassification of workers as independent contractors to avoid providing benefits.

This included workers in various sectors such as rideshare drivers, delivery personnel, freelance writers, and more.

To enforce this change, California created the ABC test, which establishes three conditions that must be met for a worker to be classified as an independent contractor.

If any one of these conditions is missed, the worker is considered an employee, regardless of their contract or business structure.

The conditions are as follows:

1.

The worker must be free from the company’s control and direction.

2.

The work performed must be outside the company’s normal course of business.

3.

The worker must operate an independent business performing the same type of work for multiple clients.

While this test may be manageable for many industries, it poses an insurmountable challenge for the trucking sector.

The core business of trucking companies is to move freight, which is precisely what owner-operators do.

Therefore, the work performed by independent truckers falls within the normal course of business for trucking companies, making it impossible to meet the second condition of the ABC test.

The California Trucking Association highlighted this issue, stating that under this test, no leased owner-operator can legally work as an independent contractor in California.

While California exempted over 100 professions from AB5, including doctors, lawyers, and real estate agents, truckers received no such consideration.

Assemblywoman Lena Gonzalez, who authored the bill, aimed to eliminate what she described as an outdated broker model in trucking.

The Teamsters Union fully supported her efforts, viewing AB5 as a pathway to organizing thousands of drivers who had resisted unionization for years.

The legal battle began immediately.

On December 31, 2019, just one day before AB5 took effect, the California Trucking Association filed a federal lawsuit.

They argued that federal law preempted AB5 under the Federal Aviation Administration Authorization Act of 1994, which prohibits states from enacting regulations related to the price, route, or service of any motor carrier.

The association contended that AB5 directly impacted how carriers structured their workforce, which in turn affected their services.

Initially, Judge Roger Benitez agreed with this argument and issued a preliminary injunction blocking AB5.

He stated that California had “run off the road and into the preemption ditch of federal law.

” For over two years, this injunction protected the trucking industry, allowing truckers to continue working under the owner-operator model.

However, the situation changed when the Ninth Circuit Court intervened.

In April 2021, a divided panel reversed the decision with a 2-1 ruling, determining that AB5 was a generally applicable labor law and that federal trucking regulations did not override it.

Judge Mark Bennett dissented, arguing that the law significantly impacted motor carrier services, but his dissent did not change the outcome.

The injunction was lifted, and the trucking association appealed to the Supreme Court, which declined to hear the case in June 2022 without providing any explanation.

In March 2024, Judge Benitez dismissed the California Trucking Association’s case, stating that courts were not the appropriate venue for this issue and suggesting that the association take their concerns to the ballot box or the legislature.

Following this, the association officially dropped its legal challenge in August 2024 after four and a half years of fighting and incurring millions in legal fees.

Despite the legal defeat, the California Trucking Association’s struggle was not in vain.

For over two years after the law became enforceable, California did not actively enforce AB5.

There were no audits, investigations, penalties, or warning letters issued.

Owner-operators continued to work as they always had, while some companies complied with the law by converting their drivers to employees.

Others ignored the law entirely, leading to a significant disparity in competition.

Companies that complied with AB5 faced immediate financial repercussions, with costs rising by 30% overnight due to payroll taxes, workers’ compensation insurance, and mandated benefits.

Meanwhile, those who ignored the law maintained lower prices and retained customers, creating an environment where compliance led to bankruptcy.

Gabriel Chaw, who ran California Intermodal Associates for nearly 25 years, experienced this firsthand.

After converting his owner-operators to employees, he lost customers to competitors who had not complied with the law.

Ultimately, he shut down his company, blaming AB5 for the loss of his business.

As enforcement of AB5 finally began in November 2025, the state cited three companies for a total of $868,000 in penalties, affecting 58 drivers.

However, by this time, many compliant companies had already exited the market.

The message was clear: the state was belatedly cracking down on violators, but the damage had already been done.

Major trucking companies recognized the impending crisis and acted accordingly.

Landstar instructed its California-based owner-operators to relocate out of state, while Prime, Inc.

offered to pay for drivers willing to move permanently.

Night Swift presented an ultimatum: leave California or sell your truck and become a company driver.

JB Hunt ceased using independent contractors in the state altogether, eliminating their relationships with owner-operators without warning.

For those drivers who refused to relocate, a new strategy emerged.

They began delivering loads into California from out of state but would drive out empty, avoiding pickups within the state.

This practice, known as deadheading, is inefficient and costly, but it allows drivers to remain technically legal.

However, this is not a sustainable model for the trucking industry; it represents an organized retreat from California’s regulatory environment.

The implications of this crisis extend beyond the trucking industry.

The ports of Los Angeles and Long Beach are the two busiest ports in the Western Hemisphere, handling roughly 31% of all containerized international waterborne trade entering the United States.

Some estimates suggest their share of containerized imports could be as high as 40%.

Every container that leaves the port relies on trucks for transportation to warehouses and distribution centers across Southern California and beyond.

Without these trucks, containers will accumulate, ships will remain offshore, and the supply chain will back up.

A significant majority of the drayage drivers responsible for moving these containers are owner-operators, the very individuals that AB5 has effectively made illegal.

As these drivers leave the state, trucking capacity decreases, leading to increased prices and longer wait times for shipments.

This situation will ultimately affect shippers, warehouses, retailers, and consumers alike.

Everything purchased that came through a California port—ranging from televisions to furniture, clothing, car parts, kitchen appliances, and children’s toys—will become more expensive due to the diminished trucking capacity.

A study conducted by the Marcato Center in January 2024 revealed that self-employment in California dropped by 10.

5%, while total employment fell by 4.

4%.

Rather than converting contractors into employees, AB5 has resulted in the elimination of jobs entirely.

Workers that the law was intended to protect found themselves with no work at all.

Neighboring states like Arizona and Nevada will also feel the repercussions of California’s trucking crisis.

Cities like Phoenix and Las Vegas do not have major container ports, relying instead on goods that flow through Los Angeles and Long Beach.

As California’s trucking capacity diminishes, these regions will experience empty shelves and rising prices, as they have no alternative supply routes.

The trucking industry is currently divided between two groups that claim to represent truckers.

The Teamsters Union has supported AB5 from the outset, arguing that it will end the exploitation of drivers and ensure fair wages, benefits, and protections.

They view owner-operators as misled workers who are not genuine business owners but rather employees denied their rights.

In contrast, owner-operators argue that they have invested substantial amounts of money into their trucks and built their client relationships through years of hard work.

They appreciate the freedom to set their own schedules and choose their routes.

According to a California Trucking Association study, owner-operators earned an average of $59,478 per year, while employee drivers made approximately $42,478—a difference of $17,000.

Many drivers made the conscious choice to pursue independence over the security of a regular paycheck, and AB5 has stripped them of that choice.

One trucker, known as D, faced a heartbreaking decision after AB5 passed: stay in California and watch her business crumble or relocate to preserve her hard-earned independence.

She chose to move to Missouri, starting anew in a different state.

Thousands of others have made similar choices.

There is hope for federal relief.

Representative Kevin Kiley, a Republican from California, has sponsored the Modern Worker Empowerment Act, which would establish a national standard for independent contractor classification and potentially override state laws like AB5.

The bill passed out of the House Education and Workforce Committee in July 2025.

Kiley has labeled AB5 one of the most damaging laws in modern American history, but whether his bill will become law remains uncertain, as Congress operates slowly and the Senate has not yet acted.

Truckers cannot afford to wait for Washington to intervene.

California shows no signs of changing course, with no exemptions for truckers being considered and no modifications to the ABC test.

The same legislature that exempted over 100 professions from AB5 has demonstrated little interest in adding truckers to that list.

The reality is stark: 70,000 owner-operators cannot legally work in California under their current business model.

They face three choices: convert to employees and accept a significant income reduction while losing their independence, continue working illegally and risk penalties now that enforcement has begun, or leave California altogether.

Most are choosing to exit the state.

California aimed to protect workers, but instead, it is witnessing the departure of those very workers.

The ports still have cranes, dock space, and ships waiting, but they are losing the trucks needed to transport cargo.

The people who once moved those containers have decided they no longer want to work in a state that has rendered their careers illegal.

The consequences of this mass exodus will reverberate throughout the economy, affecting everything from consumer prices to the availability of goods, and the state must reckon with the fallout of its policies.