Seven years after AB 5 was signed, California’s ABC test is fully in force for motor carriers. Here is how the law works, how the court fights ended, and what it means for Kern freight and the yards and buildings it uses.
AB 5 trucking California rules come from Assembly Bill 5, signed in September 2019 and effective Jan. 1, 2020. The law codified the ABC test from the 2018 Dynamex decision. A driver is presumed to be an employee unless the hiring carrier proves all three prongs. Courts rejected the trucking industry’s challenges, and the law has been enforceable against motor carriers since mid-2022. That shapes how Kern County carriers, owner-operators and shippers work.
AB 5 and trucking at a glance
| Item | Detail |
|---|---|
| Law | Assembly Bill 5 (2019), amended by AB 2257 (2020); Labor Code sections 2775 to 2787 |
| Signed / effective | September 2019 / Jan. 1, 2020 |
| Test | ABC test from Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 |
| Trucking status | Enforceable against motor carriers since mid-2022, after the U.S. Supreme Court denied review on June 30, 2022 |
| Enforced by | Labor Commissioner and other state labor agencies; private lawsuits and Private Attorneys General Act (PAGA) claims |
| Who it affects | Motor carriers using owner-operators, shippers and warehouse users that hire contracted drivers, last-mile delivery |
| Main exemption | Business-to-business exemption, Labor Code section 2776 (12 conditions) |
| Penalties | Willful misclassification: $5,000 to $25,000 per violation (Labor Code section 226.8) |
| Status | In force; the Ninth Circuit affirmed the rejection of OOIDA’s challenge on May 16, 2025 |
| What to watch | Labor Commissioner trucking cases; federal Department of Labor independent contractor rule (proposed February 2026, federal wage law only) |
Key takeaways
- AB 5, effective Jan. 1, 2020, presumes a worker is an employee unless the hiring entity proves all three prongs of the ABC test.
- The U.S. Supreme Court declined to hear California Trucking Association v. Bonta on June 30, 2022. That left in place the Ninth Circuit’s April 28, 2021 ruling that federal motor carrier law does not preempt AB 5.
- A federal judge rejected renewed trucking challenges on March 15, 2024. A Ninth Circuit panel affirmed on May 16, 2025, holding that AB 5 and its business-to-business exception do not violate the dormant Commerce Clause.
- Willful misclassification carries civil penalties of $5,000 to $25,000 per violation under Labor Code section 226.8.
- In late October 2025 the Labor Commissioner issued about $868,000 in citations over 58 delivery drivers. FreightWaves called it likely the first AB 5 trucking enforcement action.
What is AB 5 and why does it matter for trucking in California?
AB 5 is California’s worker classification law, and it hits trucking harder than most industries. In 2018 the California Supreme Court adopted the ABC test in Dynamex. The governor signed AB 5 in September 2019 to apply the test broadly, and it took effect Jan. 1, 2020. AB 2257 later moved it into Labor Code sections 2775 to 2787, according to the Labor and Workforce Development Agency.
Under the ABC test, a worker is an employee unless the hiring entity proves all three of the following:
- A: The worker is free from the control and direction of the hiring entity in performing the work, both under the contract and in fact.
- B: The worker performs work outside the usual course of the hiring entity’s business.
- C: The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
Prong B is the problem for trucking. When a motor carrier uses owner-operators to haul freight, the drivers are doing the carrier’s core business, which makes that prong hard to satisfy, as law firm Palmer Kazanjian Wohl Hodson explained in 2022. Before AB 5, many California carriers leased trucks and drivers from owner-operators who were treated as independent contractors under the older, multi-factor Borello test.
AB 5 trucking California lawsuits: how did the court fight end?
The industry lost. The California Trucking Association (CTA) and the Owner-Operator Independent Drivers Association (OOIDA) fought AB 5 in federal court for more than five years and lost on each major argument on appeal and on remand.
| Date | Event |
|---|---|
| 2018 | Dynamex adopts the ABC test for California wage orders |
| Jan. 1, 2020 | AB 5 takes effect; a federal court in San Diego had already blocked enforcement against motor carriers |
| April 28, 2021 | Ninth Circuit reverses the injunction, holding AB 5 is not preempted by the federal motor carrier statute |
| June 30, 2022 | U.S. Supreme Court denies CTA’s petition (No. 21-194) |
| Mid-2022 | AB 5 becomes enforceable against motor carriers |
| March 15, 2024 | Judge Roger Benitez rejects renewed CTA and OOIDA challenges |
| August 2024 | CTA ends its legal challenge; OOIDA appeals |
| May 16, 2025 | Ninth Circuit panel affirms against OOIDA in an unpublished memorandum |
| Late October 2025 | Labor Commissioner issues likely first AB 5 trucking citations |
The key ruling came in California Trucking Association v. Bonta. The Ninth Circuit held that AB 5 is a generally applicable labor law that does not bind or freeze into place the prices, routes or services of motor carriers. It is therefore not preempted by the Federal Aviation Administration Authorization Act. The Supreme Court denied review on June 30, 2022.
On remand, Judge Benitez rejected the industry’s renewed theories in March 2024. He wrote that fixing perceived flaws in AB 5 was work “better left to the soap box and the ballot box than to the jury box,” as Trucking Info reported. CTA then dropped its fight, according to Transport Topics.
In OOIDA v. Bonta, a Ninth Circuit panel held on May 16, 2025 that OOIDA failed to show AB 5 places a substantial burden on interstate commerce. The panel also held that the business-to-business exception does not violate the dormant Commerce Clause or the Equal Protection Clause.
Can owner-operators still be independent contractors under AB 5?
Yes, but only if the relationship fits an exemption, chiefly the business-to-business exemption in Labor Code section 2776. If all 12 conditions are met, the older Borello test applies instead of the ABC test. The conditions include that the service provider runs an independently established business and can contract with other businesses for the same or similar services, according to the LWDA FAQ.
Leased owner-operators running under a carrier’s authority have the hardest time. Law firm Benesch noted in 2024 that the court was skeptical a carrier could meet the exemption while complying with federal Truth-in-Leasing rules. Owner-operators with their own operating authority, customers and rates generally fit better, but each condition must still be proven.
| Model | How it works | AB 5 classification risk |
|---|---|---|
| Employee drivers | Carrier hires W-2 drivers; carrier owns or leases equipment | Lowest; carrier bears payroll, workers’ comp and wage-hour duties |
| Leased owner-operator | Driver’s truck is leased to the carrier and runs under the carrier’s authority | Highest; prong B and the B2B conditions are hard to meet |
| Owner-operator with own authority | Independent business contracts with shippers, brokers or carriers | Moderate; depends on meeting all 12 B2B conditions in fact |
| Brokerage model | Licensed broker arranges loads with independent carriers | Fact-specific; one restructuring path firms describe |
Law firms describe three main responses: reclassify drivers as employees, move to a freight brokerage model, or build a documented B2B relationship. In 2024, CTA chief executive Eric Sauer said the law’s sponsors “had to take the position that the state’s 70,000 owner-operators had a right to conduct business in the state,” as Transport Topics quoted him. That figure is his, not an official count.
Is AB 5 being enforced against trucking companies?
Yes, and the first reported action came in late 2025. As of August 2024, Transport Topics reported that California regulators had not tried to enforce the law against carriers. That changed in late October 2025. The Labor Commissioner cited Mega Nice Trucking, Ryder Last Mile and Costco Wholesale over 58 delivery drivers. FreightWaves reported that the Commissioner found the carrier was an employer under both the ABC test and Borello, and that Costco and Ryder Last Mile exercised direct and indirect control as joint employers.
The citations totaled $868,127.76 with interest, about $663,000 of it for workers, covering minimum wage, overtime, meal and rest period and sick pay claims. The Labor Commissioner’s Oct. 30, 2025 news release said all three employers have appealed the citations, so the findings are not final.
Private lawsuits and PAGA claims remain the larger risk. State agencies can also assess penalties of $5,000 to $25,000 per violation for willful misclassification under Labor Code section 226.8.
How do Prop 22 and the federal independent contractor rule fit in?
Neither changes the result for traditional freight carriers. Proposition 22 lets app-based rideshare and delivery companies treat drivers as independent contractors if they meet its conditions. The California Supreme Court upheld it in Castellanos v. State of California on July 25, 2024. AB 1340 gave those drivers the right to unionize and bargain starting Jan. 1, 2026, according to CalChamber. Prop 22 does not cover traditional motor carriers.
At the federal level, the U.S. Department of Labor proposed a new independent contractor rule on Feb. 26, 2026, using an economic reality test built on two core factors: control and opportunity for profit or loss. It was published in the Federal Register on Feb. 27. Comments closed April 28, 2026, and a final rule was still pending as of an Aug. 19, 2026 Self Employed report. A federal rule governs the Fair Labor Standards Act. It does not change California’s ABC test for state-law claims.
What does AB 5 mean for Kern County trucking, truck yards and warehouses?
It changes who carries the real estate burden. Kern is crossed by I-5, SR-99 and SR-58, and its distribution, agriculture and energy economy runs on trucks (see why Kern County works for logistics). The industrial market is active. Brokerage reports counted 1,499,945 square feet of positive net absorption in Bakersfield buildings of 50,000 square feet or more in Q2 2026, and published market data put overall Bakersfield industrial vacancy at 9.55% that quarter. The two reports measure different inventories, so the figures are not directly comparable.
When a carrier converts owner-operators to employee drivers with company equipment, it takes on the parking, fueling, maintenance and dispatch that independent owners once handled themselves. That work needs space. In our view, that is one reason truck yards, industrial outdoor storage, trailer parking and maintenance shops matter to Kern carriers. That is Kern CRE’s reasoning rather than a measured trend. Recent county filings include a travel center approved at I-5 and Stockdale Highway and a truck repair shop with semi-truck parking planned on Taft Highway.
For shippers and warehouse tenants
The 2025 citations show that a company receiving deliveries or freight services can be named a joint employer if it controls schedules, uniforms, protocols or performance monitoring. Delivery and drayage contracts, indemnities and insurance are the main exposure points, and warehouse users reduce risk by not directing contracted drivers the way they direct employees.
For landlords and buyers
Trucking tenants with large contractor fleets carry misclassification exposure that can affect credit. On truck yard and IOS deals, zoning must allow truck parking and repair, and use, storage and environmental clauses should cover fuel and fluids. Pending wage claims are a standard due diligence item when buying carrier-occupied property. Related reading: California employment laws for 2026 and Advanced Clean Fleets in 2026.
AB 5 compliance checklist for Kern carriers, shippers and owners
- Carriers: Audit each driver relationship against the ABC test and, if relying on the exemption, all 12 B2B conditions. Document separate authority, customers, rates and equipment.
- Carriers converting to employees: Budget payroll, workers’ compensation, meal and rest breaks, sick leave and the space to park and maintain equipment.
- Owner-operators: Keep your own business license, operating authority, insurance and multiple customers, and negotiate your own rates.
- Shippers and warehouse users: Review delivery and drayage contracts for indemnity and insurance, and limit day-to-day control over contracted drivers.
- Landlords: Ask trucking tenants about classification practices and pending claims before signing or renewing.
- Everyone: Get legal advice before restructuring a driver relationship.
Frequently asked questions
Is AB 5 enforced against truckers in California?
Yes. AB 5 has applied to motor carriers since mid-2022, when the U.S. Supreme Court declined on June 30 to review the ruling that federal law does not preempt it. Later federal challenges failed in 2024 and 2025. The Labor Commissioner’s late October 2025 citations covered 58 delivery drivers and were reported as likely the first of their kind in trucking.
Can an owner-operator still be an independent contractor in California?
Yes, if the relationship passes the ABC test or fits an exemption, usually the business-to-business exemption in Labor Code section 2776. That exemption has 12 conditions, including running an independent business and contracting with other businesses. An owner-operator leased to one carrier faces the toughest road. One with its own authority and customers has a better case but must prove every condition.
What is the business-to-business exemption under AB 5?
It is a carve-out in Labor Code section 2776 for genuine contracts between businesses. When the hiring entity proves all 12 conditions, courts apply the older Borello test rather than the ABC test. The conditions include freedom from control and the ability to serve other customers. The Ninth Circuit held in May 2025 that the exception does not discriminate against interstate commerce.
What are the penalties for misclassifying truck drivers in California?
Misclassified drivers can recover unpaid minimum wage, overtime, meal and rest period premiums, sick pay and expense reimbursements, often through class actions or PAGA claims. Agencies can assess $5,000 to $25,000 per violation for willful misclassification under Labor Code section 226.8. A company that controls contracted drivers can also be cited as a joint employer, as happened in October 2025.
Does the 2026 federal independent contractor rule override AB 5?
No. The Labor Department’s February 2026 proposal would set the test for federal laws such as the Fair Labor Standards Act. California’s ABC test still controls state wage and hour claims, so carriers must satisfy both. Comments closed April 28, 2026, and a final rule was still pending as of reports in August 2026.
Does Prop 22 apply to truck drivers?
No. Proposition 22 covers app-based rideshare and delivery drivers who meet its conditions. Carriers and owner-operators hauling freight are judged under AB 5’s ABC test or the business-to-business exemption instead. The California Supreme Court upheld Prop 22 on July 25, 2024, and since Jan. 1, 2026, AB 1340 has let those drivers unionize.
Does AB 5 apply to real estate agents and brokers?
Not in the usual way. The LWDA FAQ says that for licensed California real estate salespersons and brokers, Business and Professions Code section 10032(b) governs employee or independent contractor status instead of the ABC test. Brokerages’ written agreements still need to meet that statute.
If AB 5 is changing how your fleet operates or how much yard, parking or shop space you need, Kern CRE can help you find Kern County truck yards, IOS and industrial buildings that fit. Call Kern CRE at 855-KERN-CRE (855-537-6273) or contact us. Get Kern County CRE news monthly: subscribe to the Kern CRE report.
Sources
- ABC Test, California Labor and Workforce Development Agency.
- Employment Status: Frequently Asked Questions, California Labor and Workforce Development Agency.
- California Trucking Association v. Bonta, No. 20-55106, U.S. Court of Appeals for the Ninth Circuit (via Justia), April 28, 2021.
- California Trucking Association v. Bonta, Docket No. 21-194, petition denied, Supreme Court of the United States, June 30, 2022.
- Ejected! California District Court Dismisses Trucking Industry’s New AB5 Challenge, Benesch, March 18, 2024.
- Judge Denies Latest Challenge to California’s AB5 Independent Contractor Law, Trucking Info (HDT), March 18, 2024.
- California Trucking Association Ends AB 5 Legal Fight, Eric Miller, Transport Topics, Aug. 28, 2024.
- Owner-Operator Independent Drivers Association v. Bonta, No. 24-2341, Memorandum, U.S. Court of Appeals for the Ninth Circuit (posted by the California Attorney General), May 16, 2025.
- Likely 1st AB5 trucking enforcement action in California snags 3 companies, John Kingston, FreightWaves, Nov. 17, 2025.
- Labor Commissioner news release on citations against Costco, Ryder Last Mile and Mega Nice Trucking, California Department of Industrial Relations, Oct. 30, 2025.
- Surviving AB 5: How the Trucking Industry Can Adapt, Palmer Kazanjian Wohl Hodson LLP, July 15, 2022.
- Castellanos v. State of California, S279622, Supreme Court of California (via Justia), July 25, 2024.
- New 2026 Labor and Employment Laws, CalChamber HRWatchdog, Oct. 15, 2025.
- US Department of Labor proposes rule clarifying employee, independent contractor status under federal wage and hour laws, U.S. Department of Labor, Wage and Hour Division, Feb. 26, 2026.
- Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act, Federal Register, Feb. 27, 2026.
- Where The DOL’s 2026 Independent Contractor Rule Now Stands, Self Employed, Aug. 19, 2026.
- South Central Valley Industrial Figures Q2 2026, CBRE, Aug. 3, 2026.
- Q2 2026 Bakersfield, CA Industrial Market Report, Lee & Associates, July 2026.
About this article
Kern CRE prepared this article with help from AI research and writing tools. An editor reviewed the draft, checked its facts against the sources linked above and edited it for accuracy and clarity. It is general information about California and federal worker classification law, not legal, tax, investment or financial advice; talk with a qualified professional about your situation.