Understanding Assembly Bill 5 for California Trucking Companies & Drivers

Some say that the “road to hell is paved with good intentions.”

The California Trucking Association says that “gasoline has been poured on the fire that is our ongoing supply chain crisis,” following a decision by the United States Supreme Court to deny challenging California’s Assembly Bill 5 (AB 5) law.

This article provides an overview of what AB 5 means for trucking companies and drivers in California. 

Read on to understand how you can adapt to AB 5 to keep your business moving forward. 

What is Assembly Bill 5?

AB 5 was passed in 2019 as a law that required companies reclassify “gig” workers as employees if those workers did not qualify as independent contractors per what is known as the “ABC” test. In order to be considered an independent contractor, a worker must: A) “be free from the control and direction of the hiring entity, both in contract and in fact”; B) “perform work that is outside the usual course of the hiring entity’s business”; and C) “be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.”

What Does AB 5 Mean For Trucking Companies & Drivers?

To preface, many trucking companies intentionally misclassify their drivers as independent contractors in order to avoid the responsibilities of classifying them as employees, which would involve taxes, benefits, workers compensation, and more. Click here to learn about Trucking Misclassification And Workers’ Compensation

However, many truck drivers are not misclassified, and are in fact owner-operators who prefer the flexibility and autonomy of being independent contractors. A truck driver who is an employee technically drives a company-owned truck, but plenty of truck drivers have proudly invested thousands of dollars into owning their own trucks.

Furthermore, there are plenty of trucking companies who do not intentionally misclassify drivers, but rather to leverage a network of independent contractors who own their own trucks and are able and willing to fulfill last-minute requests or seasonal shipments. Unfortunately, AB 5 means that trucking companies won’t be able to enlist independent contractors like they used to.

AB 5 Trucking Compliance

AB 5 effectively leaves owner-operators with no choice but to acquire their own California motor carrier authority if they wish to remain independent, instead of joining a trucking company as full-time employees.

For trucking companies who wish to no longer work with truck drivers as independent contractors and instead hire them as employees, motor carriers need to perform as much due diligence with hiring a familiar contractor as they would with hiring any new employee. Companies should keep a driver qualification file for every driver, including the driver’s road test and certificate, annual driver’s certification of violations, annual driving record, driver’s application for employment, and medical examiner’s certificate.  

This article is not an exhaustive or complete list of legal and insurance requirements for motor carriers, which is why we recommend seeking the expertise of an insurance agency that specializes in transportation compliance.

Get Back On The Road With SWAN Insurance

At SWAN Insurance, we proudly recognize how much California—as well as the entire country—relies on the trucking industry. 

We’re here to help minimize the downtime that AB 5 may have caused to trucking companies and drivers, so that you get back on the road as soon as possible.

SWAN Insurance helps trucking businesses protect themselves in an industry that has always carried high risk and may now be forever changed by AB 5. If you have questions about Motor Carrier Authority, commercial trucking insurance, or AB 5 compliance, you can give us a call and speak to one of our agents today. 

Call Us Today: 858-381-3108
Email: info@swan-ins.com