What You Need to Know About California’s AB5 in 2025
California’s Assembly Bill 5 (AB5), also known as the “gig economy law,” was passed in 2019 and took effect on Jan. 1, 2020. Originally intended to address worker misclassification in sectors like ride-hailing and delivery services, the law significantly alters how workers are classified across multiple sectors, including trucking. Five years later, it is still being challenged in the legal system.
At its core, AB5 codifies the “ABC test” that determines whether a worker is an independent contractor or an employee. To qualify as an independent contractor under AB5, all three conditions of the ABC test must be met:
- A: The worker must be free from the control and direction of the hiring entity in both practice and agreement.
- B: The work performed must be outside the usual course of the hiring entity’s business.
- C: The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
For the trucking industry, the “B” condition presents a critical challenge. Since driving trucks is central to a carrier’s business, satisfying this criterion is nearly impossible for owner-operators leasing on with carriers. As a result, many trucking companies and independent drivers have found themselves grappling with compliance.
Who is exempt from AB5?
While certain professions, such as licensed doctors, attorneys, engineers, and direct sellers, are exempt from the law, the trucking industry was not granted an exception. This means most independent truckers and their contracting relationships with carriers, brokers, or shippers must adhere to the ABC test.
Does AB5 ban owner-operators from the state?
AB5 doesn’t ban owner-operators in California, but it does create substantial barriers. For carriers, proving that owner-operators are independent contractors often requires restructuring agreements or hiring more company drivers, which can be costly and complicated. For owner-operators, the law jeopardizes their ability to maintain autonomy while contracting with trucking companies.
Moreover, AB5 applies broadly to California-based work, regardless of the worker’s residency. This means any driver performing work within California may be subject to the law.
Legal challenges to AB5
Since AB5’s enactment, the trucking industry has mounted challenges to the law in court, citing its potential to disrupt the livelihoods of independent truckers and alter long-standing industry practices. Despite these efforts, AB5 has been upheld in court, with multiple legal challenges led by the California Trucking Association (CTA) ultimately failing.
The CTA officially dropped its legal challenge to AB5 in August 2024, concluding four-and-a-half years of litigation. In its statement, the association reiterated concerns that AB5’s ABC test effectively eliminates owner-operators as independent contractors for motor carriers, a point they argued could harm California’s 70,000 independent truck drivers.
Enforcement remains murky
Despite AB5 taking effect in January 2020, California has not actively enforced the law in the trucking industry. To date, there have been no reported audits, investigations, or lawsuits targeting trucking companies for violations under AB5. Legal experts speculate that state regulators may be holding off enforcement until all major litigation surrounding the law is resolved.
For example, in 2022. California’s Labor Commissioner publicly encouraged truckers who believe they have been misclassified to report their cases, yet no known action has been taken against any trucking company for such violations. While other transportation industries like ride-hailing have faced legal consequences for worker misclassification, trucking companies have thus far avoided similar scrutiny.
What’s next for trucking under AB5?
The future of AB5 enforcement in the trucking industry remains unclear, with California’s labor laws creating a puzzling landscape. While AB5 applies to the state’s trucking sector, active enforcement has yet to materialize. Many industry experts speculate this delay stems from the ongoing legal challenges and uncertainties surrounding the law.
Currently, the Owner-Operator Independent Drivers Association (OOIDA) is leading the last significant legal battle against AB5. Their case focuses on interstate commerce, arguing that applying AB5 to independent truck drivers operating across state lines is overly restrictive and unconstitutional under federal law.
Now or never: The OOIDA case
OOIDA’s legal argument differs from previous challenges led by the California Trucking Association (CTA), which sought to invalidate AB5 entirely. OOIDA is specifically challenging the enforcement of AB5 against independent truckers involved in interstate commerce, citing:
- Interstate commerce restrictions: OOIDA argues that AB5’s “B-prong” test, which requires independent contractors to perform work outside the usual course of the hiring entity’s business, effectively excludes leased owner-operators from operating legally in California.
- Discrimination against out-of-state drivers: The association contends that California-based carriers can offset AB5 compliance costs more effectively than out-of-state operators, giving local businesses a competitive advantage.
- Conflict with federal laws: OOIDA highlights how AB5’s business-to-business (B2B) exception conflicts with federal leasing regulations, making it nearly impossible for leased owner-operators to comply.
Broader implications and moving forward
While the law sought to address worker misclassification, critics argue that its broad application will disrupt interstate commerce and disproportionately harm small trucking businesses.
At the same time, California regulators have yet to clarify their approach to AB5 enforcement in trucking. The lack of legal action or audits against motor carriers adds to the confusion, leaving many trucking companies in limbo.
Industry leaders are watching closely as OOIDA’s case progresses. If successful, the challenge could limit AB5’s scope and provide relief for thousands of independent truckers who rely on operating across state lines.
Is AB5 here to stay after 5 years?
After five years of legal battles, industry pushback, and lingering uncertainty, it appears that AB5 is not going away. The controversial law has withstood numerous challenges, including efforts by the California Trucking Association and ongoing litigation from the Owner-Operator Independent Drivers Association. Despite these hurdles, enforcement and penalties in the trucking industry haven’t happened at scale, leaving carriers, brokers, and owner-operators in an odd position.
As discussed, the lack of enforcement to date has created a sense of ambiguity. Some speculate that California regulators have held back due to ongoing litigation or the sheer complexity of applying AB5’s “ABC” test to trucking. However, this pause in enforcement doesn’t guarantee a permanent reprieve. Regulators could choose to act at any time, creating a high-stakes gamble for the industry.
The law’s broad scope and its potential conflicts with federal regulations make it difficult for trucking companies to navigate. If the final major legal challenge ends with AB5 fully intact, carriers and brokers may have to reevaluate their relationships with owner-operators, while many independent drivers face the prospect of seeking employee roles or losing access to the California market entirely.