If you’re an independent truck driver in California, you’ve probably heard about Assembly Bill 5 (AB5). This law has shaken up the industry, forcing many owner-operators to rethink their careers.
AB5 was meant to protect workers, but for truck drivers who own and operate their own rigs, it has created more problems than solutions. This article will break down what AB5 is, how it affects independent truckers, and what you can do to stay ahead in this rapidly changing landscape.
What is AB5?
AB5, or Assembly Bill 5, is a California law designed to prevent companies from misclassifying employees as independent contractors. It was passed in 2019 and went into effect on January 1, 2020.
The law introduces the ABC Test, which determines whether a worker should be classified as an independent contractor or an employee. To be considered an independent contractor, a worker must:
- Operate without control – The company cannot dictate how the worker does their job.
- Perform work outside the company’s main business – The work must be separate from the company’s primary function.
- Run an independent business – The worker must already be engaged in the trade or profession they’re being hired for.
For many owner-operators, passing this test is tough. Trucking companies rely on independent contractors, but AB5 forces them to classify most of these drivers as employees, changing the way the entire industry operates.
How AB5 Affects Independent Truckers
AB5 has introduced major challenges for independent truck drivers, reshaping how they work and earn a living. From employment reclassification to rising costs, the law has forced many to reconsider their future in trucking.
Independent Truckers Must Become Employees
Before AB5, owner-operators could lease their trucks to a larger carrier and run their business independently. Now, California law says these drivers must be classified as employees—which is something most independent truckers don’t want.
Being an employee driver means:
- Losing control over when and where you drive.
- Having a fixed schedule instead of choosing your own loads.
- Giving up the flexibility that comes with being your own boss.
Many independent truckers have spent hundreds of thousands of dollars on their rigs so they could work for themselves. AB5 has forced them to either become employees or leave California’s trucking market altogether.
Increased Costs for Trucking Companies
Trucking companies have relied on independent contractors to handle extra loads. Under AB5, they must now hire these drivers as employees, which means:
- Paying higher wages and employee benefits (healthcare, sick leave, etc.).
- Covering workers' compensation and payroll taxes.
- Spending more on administration and compliance.
To avoid these costs, some companies have cut back on hiring independent truckers, making it even harder for owner-operators to find work.
More Pressure on the Supply Chain
California is a major transportation hub, handling about 40% of U.S. imports. Many of these goods are transported by independent truck drivers. But because of AB5, fewer truckers are available, leading to:
- Shipping delays at ports and warehouses.
- Increased freight costs, which get passed on to consumers.
- More inflation, as the cost of goods rises due to transportation problems.
At a time when the supply chain is already struggling, AB5 has only made things worse.
Legal Battles and Uncertainty
Since AB5 became law, the trucking industry has fought back.
- The California Trucking Association (CTA) sued the state, arguing that federal laws should override AB5 when it comes to interstate trucking.
- Courts initially blocked AB5 from applying to truckers, but in 2022, the Supreme Court refused to hear the case, making AB5 fully enforceable in the trucking industry.
- The Owner-Operator Independent Drivers Association (OOIDA) is still pushing for changes to the law.
Even though AB5 is now technically in effect, no one knows how strictly it will be enforced. The state has not provided clear guidelines on how the law will be applied to truckers, leaving many drivers in limbo.
Let’s take a closer look at how AB5 is disrupting the trucking industry and what it means for owner-operators trying to stay in business.
What Can Independent Truckers Do?
With AB5 in full effect, independent truckers are faced with tough choices. While the law limits traditional contracting, there are still ways for owner-operators to maintain their independence and continue working in the industry.
Get Your Own Operating Authority
One way to stay independent is to apply for your own Motor Carrier Authority (MC number). This allows you to:
- Book your own loads without relying on larger carriers.
- Negotiate your own contracts and set your own rates.
- Work across state lines, avoiding California’s strict AB5 rules.
The downside? It requires more paperwork, insurance, and legal compliance—but many drivers are choosing this path to stay in business.
Consider Moving Out of California
Some truckers are leaving California altogether. States like Texas, Arizona, and Nevada have more truck-friendly regulations and don’t have laws like AB5.
Join a Trucking Co-op
Another option is to join a trucking cooperative, where truckers work together as a group instead of being classified as employees. This keeps drivers independent while sharing resources.
Let’s explore the best options available for truckers who want to stay in business while navigating California’s new regulations.
What’s Next for AB5 and the Trucking Industry?
AB5 isn’t going away anytime soon. California has made it clear that it will enforce the law, and other states may follow suit.
At the same time, trucking organizations are still fighting in court, and there’s a chance the law could be adjusted for truckers in the future. But for now, independent truckers in California have three choices:
- Become an employee of a trucking company.
- Get their own operating authority and run as a full business.
- Leave California to continue working as independent contractors.
The future is uncertain, but one thing is clear—AB5 has permanently changed the trucking industry in California.
Final Thoughts: What Should You Do?
If you’re an independent truck driver in California, you need to have a plan. The best thing you can do is educate yourself, understand your options, and decide what works best for your business.
Want to stay on top of trucking regulations and payroll solutions? Superior Trucking Payroll Service can help you navigate the changes and keep your business running smoothly.
Contact us today to learn how we can help you stay compliant while protecting your independence
Written by Mike Ritzema
Before founding Superior Trucking Payroll Service, Mike was the CFO of a trucking company with 80 trucks and a thriving brokerage. This experience gave him the perspective that a payroll solution has to make the lives of the office people better. All the solutions he has designed are to benefit everyone. Our company mission is to help trucking families and that includes the company owners, the drivers, and the office.