California’s Trucking Crisis: How Labor Regulations Are Reshaping Supply Chains and Raising Prices Across the WestCalifornia’s trucking industry, long a cornerstone of the American supply chain, is undergoing a profound transformation.

The disruption is not driven by recession or declining demand, but by regulatory changes that have altered the economics of trucking within the state.

At the center of the controversy is Assembly Bill 5, a labor law passed in 2020, whose enforcement against independent truck drivers has triggered a mass exit from the industry, tightened freight capacity, and raised costs that now ripple far beyond California’s borders.

The consequences are increasingly visible in higher prices, delayed shipments, and growing concern among farmers, manufacturers, retailers, and consumers alike.

What began as a labor classification reform has evolved into a supply chain challenge with national implications.

The Law That Changed the Industry

Assembly Bill 5, known as AB5, was enacted in September 2020 with the stated goal of protecting gig workers by reclassifying many independent contractors as employees.

The law introduced an “ABC test” to determine employment status.

Under Part B of that test, a worker cannot be considered an independent contractor if the work performed is within the usual course of the hiring company’s business.

For trucking, this provision proved decisive.

A driver hauling freight for a logistics company is performing the core function of that business, meaning the driver would no longer qualify as an independent contractor.

Instead, companies would be required to classify such drivers as employees, providing trucks, fuel, insurance, payroll taxes, and employee benefits.

The trucking industry challenged the law, arguing that it violated federal protections preventing states from interfering with interstate commerce.

For nearly two years, an injunction shielded truckers from enforcement.

In June 2022, however, the United States Supreme Court declined to hear the case, removing the legal barrier.

Enforcement began almost immediately.

Within days, the California Labor Commissioner announced audits and penalties for companies continuing to rely on independent owner-operators.

Trucking firms were given a stark choice: convert drivers to employees or stop operating in California.

An Industry Built on Independence

For decades, California’s short-haul trucking sector has depended heavily on independent owner-operators, particularly for port drayage operations moving containers from ports to warehouses and rail yards.

These drivers own their trucks, pay their own expenses, set their schedules, and earn profits after costs.

A typical owner-operator hauling containers from the Port of Long Beach might gross about $200,000 annually, with net earnings of $70,000 to $90,000 after fuel, maintenance, insurance, and tolls.

The work is demanding and risky, but it offers autonomy and the possibility of building equity through equipment ownership.

Reclassification fundamentally alters that equation.

When drivers become employees, companies must supply trucks, cover fuel, pay workers’ compensation premiums, handle payroll taxes, provide benefits, and comply with California’s strict overtime and break rules.

Industry analysts estimate that total labor costs per driver can double under the employee model.

For small and midsize carriers operating on profit margins of 3 to 7 percent, those costs are unsustainable.

A Rapid Exodus

The result has been a swift contraction in California’s independent trucking workforce.

By the end of 2022, analysts were tracking a steep decline in active owner-operators registered to haul freight in and out of California ports.

Within six months of enforcement, industry estimates suggested more than 15,000 independent drivers had left the state, shifted routes to avoid California, or exited trucking altogether.

The scale of that departure is significant.

California’s ports of Los Angeles, Long Beach, and Oakland handle more than 40 percent of all containerized imports entering the United States.

Those containers must be moved quickly inland, a task traditionally performed by independent drivers specializing in short-haul, high-frequency trips.

When thousands of those drivers disappeared, hauling capacity fell sharply.

Rising Costs and Bottlenecks

The immediate effect was a surge in drayage rates.

By early 2023, the cost to move a container from the Port of Long Beach to a warehouse 60 miles inland had risen 30 to 50 percent.

Loads that once cost $350 now commanded $500 to $700 during peak periods.

These increases did not remain confined to transportation budgets.

Importers passed higher costs to wholesalers, retailers, and ultimately consumers.

A midsize furniture importer in Orange County reported a 42 percent jump in logistics expenses during the first quarter of 2023, forcing price increases across product lines.

Similar patterns appeared across retail categories, contributing to higher prices for furniture, appliances, and household goods.

Agriculture Feels the Impact

California’s agricultural sector has been particularly vulnerable.

The state produces more than one-third of the nation’s vegetables and two-thirds of its fruits and nuts.

These crops depend on rapid transport from fields to packing houses, cold storage facilities, and distribution centers.

Independent truckers have historically filled that role.

With fewer drivers available, wait times to secure trucks increased from 24 hours to as long as a week in some regions.

Refrigerated produce sat idle, spoiling before it could reach market.

In the spring of 2023, a strawberry grower in the Salinas Valley reported losing nearly 30 percent of a harvest due to transportation delays.

Similar losses were recorded by lettuce, tomato, and citrus producers across the Central Valley.

For farmers already facing water shortages, rising fuel prices, and labor constraints, the trucking shortage compounded existing pressures.

National Carriers Step Back

One might expect large national carriers to fill the gap left by independent drivers.

Instead, many have avoided expanding operations in California.

The reason lies in California’s labor environment.

Overtime rules, meal and rest break penalties, and workers’ compensation premiums rank among the highest in the country.

To reduce exposure, national carriers increasingly route California-bound freight through Nevada, Arizona, or Oregon, relying on out-of-state drivers for final delivery.

The approach is less efficient, but cheaper and legally safer.

As a result, the shortage persists even among companies with the capital to hire employees and buy fleets.

Environmental Mandates Complicate the Picture

The trucking crisis intersects with another major regulatory shift.

In 2021, the California Air Resources Board adopted the Advanced Clean Fleets Regulation, mandating that drayage trucks transition to zero-emission vehicles by 2035 and most heavy-duty trucks by 2036.

Electric Class 8 trucks currently cost between $300,000 and $450,000, compared to $120,000 to $180,000 for diesel models.

For independent owner-operators, such prices are prohibitive.

For small carriers already losing drivers under AB5, the capital burden is daunting.

The combined effect is a paradox: labor laws are driving independent truckers out of business, while environmental mandates require massive investment from an industry whose participants are disappearing.

Political Resistance to Change

Despite mounting evidence of disruption, state leaders have shown little willingness to revise AB5.

Governor Gavin Newsom’s office has repeatedly defended the law as necessary to prevent worker exploitation and strengthen labor protections.

Official statements emphasize long-term environmental and social goals, while largely avoiding discussion of freight capacity or price impacts.

Industry groups have urged lawmakers to grant trucking an exemption similar to those provided to real estate agents, doctors, and lawyers.

The legislature has declined.

Labor unions, particularly the Teamsters, support eliminating the independent contractor model in trucking, arguing that it undermines labor standards and unionization.

Union leaders have stated openly that bringing drivers into employee status strengthens collective bargaining power.

The political calculus is clear.

Organized labor holds substantial influence in Sacramento, while independent truckers possess little lobbying power.

Human Consequences

Behind the statistics lie thousands of personal stories.

One case widely cited involves a driver in Riverside County who hauled containers from Long Beach for over a decade.

When enforcement began, he accepted an employee position with a large carrier at a 38 percent pay cut.

The rigid schedule eliminated flexibility to care for family needs.

Within eight months, financial strain forced the family to sell their home and move in with relatives.

The driver eventually left trucking for warehouse work.

Similar stories have surfaced across the state, illustrating the gap between the law’s intentions and its outcomes.

Budget Pressures and Broader Implications

California now faces a budget deficit approaching $38 billion.

At the same time, the costs of enforcing AB5, defending it in court, and managing economic fallout continue to rise.

Other states are watching closely.

Some, including Oregon and Washington, have debated similar labor rules, while others cite California as a warning against sweeping reclassification laws in transportation.

The stakes extend beyond state borders.

California remains the gateway for nearly half of America’s imports and a primary source of domestic produce.

Any sustained disruption in its trucking sector affects supply chains nationwide.

A System Under Strain

The chain of cause and effect is increasingly evident.

Labor reclassification reduced the number of independent drivers.

Reduced capacity raised transportation costs.

Higher costs increased prices.

Delays caused spoilage and shortages.

Small businesses closed.

Families lost livelihoods.

Yet the regulatory framework remains unchanged.

Supporters argue that the transition will eventually produce a more stable, unionized, and environmentally sustainable trucking industry.

Critics counter that the immediate damage is too great and that the long-term benefits remain uncertain.

The Road Ahead

With no legislative fix on the horizon, industry analysts expect the capacity crunch to continue.

More drivers are likely to leave.

More carriers may shift operations out of state.

Environmental mandates will impose further costs.

For consumers, the impact will be gradual but persistent: higher grocery bills, more expensive goods, and longer delivery times.

The central question now facing policymakers is whether the goals of worker protection and environmental progress can be achieved without dismantling the logistics network that underpins the western economy.

As California’s experience shows, the balance between regulation and economic reality remains fragile.

And for a nation dependent on trucks to move nearly everything it consumes, the outcome matters far beyond state lines.