Transcription
The California Trucking Association just dropped their legal fight after 4 and a half years. Their statement was blunt. California's new law effectively eliminates owner operators as independent contractors. 70,000 truckers gone. And now major carriers are telling their drivers to do something unprecedented. Leave California entirely.
Landstar, one of the largest trucking companies in America, is recommending drivers relocate out of state. Other companies are telling truckers to refuse any load that originates in California. The industry isn't fighting anymore. They're fleeing. And Governor Nuomo is about to find out what happens when you pass a law so extreme that truckers would rather abandon the largest economy in America than comply with it.
California moves 40% of all shipping containers that enter the United States. The ports of Los Angeles and Long Beach are the busiest in the Western Hemisphere, and the trucks that move that cargo are now being told to stay away. In this video, I'm going to show you exactly what this law does, why 70,000 truckers are affected, what major companies are telling their drivers, and what happens to California's supply chain when the trucks stop coming.
Let me explain what California did. In September 2019, Governor Nuomo signed Assembly Bill 5 into law. It is called the gig worker bill, and it was designed to reclassify independent contractors as employees. The law uses what is known as the ABC test. To be considered an independent contractor, a worker must meet all three criteria. A, they must be free from the control and direction of the hiring company's management. B, the work they perform must be outside the usual course of the hiring company's business. C, they must be customarily engaged in an independently established trade or business.
Here is the problem for truckers. It is the B prong. If you are an independent trucker hauling freight for a trucking company, you are doing the exact same work as that company's core business. You are hauling freight for that company. Under AB5, that automatically makes you an employee, not an independent contractor. The California Trucking Association put it plainly, "The B prong of the ABC test effectively excludes leased owner operators from operating legally in California."
Now, some professions got exemptions from AB5. Licensed doctors, attorneys, engineers, and direct sellers were carved out, but truckers received no exemption. The trucking industry was not granted an exception. These rules are not like other states with similar ABC tests. California's version is the strictest in the country. Most other states only deny independent contractor status if workers perform their work in the same location. California tied it to the nature of the business itself. That decision just gutted an entire industry.
The trucking industry didn't go quietly. One day before Assembly Bill 5 was set to take effect on January 1st, 2020, the California Trucking Association filed a lawsuit. A federal judge issued a restraining order that prevented the law from applying to motor carriers. For 4 and 1/2 years, truckers operated under that injunction while the case worked its way through the courts. In May 2021, the 9th Circuit Court of Appeals ruled against the trucking industry and reversed the lower court's decision. They allowed the injunction to stay in place while the case was appealed to the Supreme Court. In June 2022, the Supreme Court declined to hear the case. They sent it back to the lower courts.
The Owner Operator Independent Drivers Association (OOIDA) picked up the fight. They argued that AB5 violates the Constitution's Commerce Clause because it discriminates against out-of-state drivers and conflicts with federal trucking regulations. In May 2024, a California district judge denied their request for a new injunction. The judge ruled that AB5 does not offend the core constitutional principle of prohibiting purposeful discrimination against interstate commerce. Then in August 2024, the California Trucking Association officially dropped its legal challenge. After 4 and a half years of litigation, they gave up.
Their statement acknowledged the reality. AB5's ABC test effectively eliminates owner operators as independent contractors for motor carriers. They warned it could harm California's 70,000 independent truck drivers. The legal options are exhausted, the industry lost, and now the consequences are hitting. So, what happens when you tell 70,000 independent truckers they can no longer operate legally in your state? They leave.
Landstar, one of the largest trucking companies in America with thousands of owner operators, began recommending that drivers relocate out of California entirely. If drivers want to stay on as independent contractors, Landstar told them to either move out of state or switch to their own authority. Other carriers are taking similar steps. Some are reviewing their lease agreements. Some are converting independent contractors to employee drivers and some are simply telling truckers to avoid California loads altogether.
Here is the workaround that has emerged. AB5 restricts independent contractors from transporting loads that originate in California, but it does not prohibit them from delivering loads coming from out of state. So truckers are deadheading out of California. They drop off their delivery, then drive out empty, refusing to pick up any freight that originates in California. Once they are out of state, they find a new load using a load board and keep moving. That is not a sustainable trucking industry. That is an evacuation.
The impact falls hardest on California-based carriers. They cannot just relocate their entire operation overnight. Out-of-state carriers are increasingly choosing to skip California entirely rather than deal with the legal uncertainty. And here's what makes this worse. California has not actively enforced AB5 against trucking companies. To date, there have been no reported audits, investigations, or lawsuits targeting trucking companies for violations under AB5. So, the industry is collapsing not because of enforcement, but because of uncertainty. Companies don't know when the hammer will drop. They don't know if they'll face back wages, tax penalties, or lawsuits. So, they're getting out before they find out.
Let's talk about what this means for California's supply chain. The ports of Los Angeles and Long Beach together handle about 40% of all shipping containers entering the United States. In 2025, despite all the tariff chaos, the port of Los Angeles processed 10 million container units. That was their third busiest year ever. Every one of those containers has to move off the dock on a truck. The trucking industry calls them drayage trucks. They are the short haul trucks that move containers from the port to warehouses and distribution centers.
Under California's advanced clean fleet regulations, drayage trucks face some of the strictest requirements. As of January 2024, only zero-emission drayage trucks can be registered in California's tracking system. So, California is simultaneously pushing truckers out with AB5 and demanding the remaining truckers buy electric vehicles that cost three to four times more than diesel trucks. The math does not work.
There are currently about 70,000 owner operators driving in California. If even a fraction of them leave or stop accepting California loads, capacity drops. When capacity drops, rates rise. When rates rise, the cost of everything that moves on a truck goes up. And in California, that's essentially everything. The groceries in your store came on a truck. The gas at your station came on a truck. The materials to build your house came on a truck. The packages at your door came on a truck. The average American household depends on trucking for virtually every physical product they consume. And California just told 70,000 of those truckers that their business model is illegal.
This isn't just a California problem. California's economy is the largest in the United States and the fifth largest in the world. It's a massive consumption market. When California's trucking capacity shrinks, the entire western supply chain feels it. Arizona and Nevada are particularly exposed. We have covered how those states depend on California for fuel. 33% of Arizona's gasoline and 88% of Nevada's comes through California pipelines, but they also depend on California's ports for consumer goods. Phoenix does not have a major container port. Neither does Las Vegas. Goods flow through Los Angeles and Long Beach onto trucks and out to the rest of the Southwest. If truckers are avoiding California loads, those goods either sit longer at the port, creating congestion, or they get rerouted through more expensive channels. Either way, prices go up for everyone in the region.
The Owner Operator Independent Drivers Association (OOIDA) argued in court that Assembly Bill 5 discriminates against out-of-state drivers. They claimed California-based carriers can offset Assembly Bill 5 compliance costs more effectively than out-of-state operators, giving local businesses a competitive advantage. The judge disagreed, but the practical reality is that interstate commerce is being disrupted regardless of the legal ruling. A trucker based in Texas has to decide. Do I accept a load going to California knowing I'll have to deadhead out empty, or do I take a different load that keeps me out of California entirely? More and more they're choosing the second option.
Here is the strangest part of this whole situation. California passed Assembly Bill 5 in 2019. It is now 2026 and the state has not actively enforced the law against trucking companies. There have been no reported audits, no investigations, no lawsuits targeting trucking companies for Assembly Bill 5 violations. In 2022, California's labor commissioner publicly encouraged truckers who believe they've been misclassified to report their cases, but no known action has been taken against any trucking company. So why is the industry collapsing if the law isn't even being enforced? Because the threat is enough.
Companies cannot operate under legal uncertainty. They cannot sign contracts, make investments, or plan for the future when they do not know if the state will suddenly decide to audit them for years of back wages and taxes. The California Trucking Association warned about this exact scenario. They argued that even without enforcement, the mere existence of Assembly Bill 5 creates substantial barriers for owner operators and carriers. They were right. The industry is self-selecting out of California. Not because they've been punished, but because they've seen what happens to industries that do not comply with California regulations. They've watched refineries spend a billion dollars to exit the state. They've watched companies relocate headquarters to Texas. The truckers looked at Assembly Bill 5 and decided they are not waiting around to find out what compliance looks like.
So, what happens next? The OOIDA lawsuit is still technically active, but legal experts consider it a long shot. The core constitutional arguments have already been rejected by multiple courts. California shows no signs of backing down. Governor Nuomo has defended Assembly Bill 5 as worker protection, arguing that independent contractors deserve employee benefits like minimum wage, overtime, and workers' compensation. But the trucking industry operates differently than gig workers for Uber or DoorDash. Owner operators have invested tens of thousands of dollars in their own equipment. They've built their own businesses. They chose independence specifically because they wanted to control their own schedules, their own routes, and their own income. Assembly Bill 5 does not give them a choice anymore.
Some trucking companies have tried to adapt by converting independent contractors to employee drivers, but that means paying payroll taxes, providing benefits, and absorbing all the costs that owner operators previously handled themselves. Many carriers can't afford it. The California Trucking Association suggested that if sufficient political or economic pressure is brought to bear, the law could be amended to include a trucking exemption, but that would require California's legislature to admit they made a mistake. And based on their track record with the refineries, with businesses leaving the state and with the highest gas prices in the nation, they don't seem interested in admitting mistakes. So, the exodus continues.
Here's where we stand. California passed a law that effectively bans the independent trucker business model. 70,000 owner operators are affected. The industry fought it for 4 and a half years and lost. Major carriers are now telling drivers to leave the state entirely. Truckers are refusing California originating loads. The supply chain that moves 40% of America's shipping containers is losing capacity. And California hasn't even started enforcing the law yet. Governor Nuomo wanted to protect workers. Instead, he's watching an industry collapse. Truckers aren't becoming employees. They're becoming ex-Californians.
The ports of Los Angeles and Long Beach can handle 10 million containers. But containers don't move themselves. They move on trucks. And the people who drive those trucks are being told they're not welcome anymore. If you want to stay informed on California's unfolding economic crisis, hit subscribe and turn on notifications. The trucking collapse is just the latest chapter, and it won't be the last.