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The Quick Guide to AB5 for Truck Drivers

Updated: Feb 17, 2023

On June 30, 2022, the U.S. Supreme Court denied certiorari on AB5. As a result, the injunction on AB5 that has been in place for over two years will be lifted, and AB5 will be law in California retroactive to January 1, 2020.

What is AB5?

Assembly Bill 5 (AB5) is a California law that restricts businesses from classifying workers as independent contractors rather than employees. The bill was driven by unions wanting to organize workers. Experts believe it will increase labor costs, create higher costs for consumers, reduce the quality of service, and most importantly, reduce the flexibility of workers. The bill is largely opposed by gig economy companies like Uber, Lyft, and DoorDash because the bill was initially created to try to combat these business models. Unfortunately, the bill will unintentionally affect independent contractor truck drivers in the state of California by making it difficult to work for themselves.

The Dynamex Ruling

AB5 is based on an April 30, 2018, California Supreme Court ruling on a case known as Dynamex. The Dynamex ruling establishes a presumption that workers are employees unless the hiring company can prove otherwise. Prior to Dynamex, the Borello test (in place since 1989) was an 11-prong test that most independent contractors (owner-operators) were able to pass. The Dynamex ruling replaces Borello with a new 3-prong test, called the ABC test, to determine if a person can be qualified as an independent contractor.

The three prongs of the ABC test that must be passed are as follows:

  1. The worker is free from the control and direction of the hirer in connection with the performance of the work

  2. The worker performs work that is outside the usual course of the hiring entity’s business*

  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

*The second prong is the part of the test that owner-operators leased to trucking companies are unable to pass.

Who is Exempt?

There are some contractors who are exempt from AB5 including doctors, dentists, insurance agents, lawyers, accountants, securities brokers, real estate agents, hairstylists, and many creative professionals. If you are exempt from AB5, you must still pass the Borello test to be qualified as an independent contractor. Owner-operators are currently not exempt from AB5.

AB5 Truck Driver

The Two-Check System

One potential solution to AB5 is for carriers to pay their drivers via a “two-check system”. Although rare, two-check systems have been around for many years. Under the two-check system, the driver is no longer an independent contractor but is instead an employee of the carrier. At the same time, the driver has a rental agreement to rent his equipment to the carrier.

The first check is if the driver is an employee, and the second check is for the rental of the driver’s equipment. However, there are nuances that make this a difficult solution.

For example, because the carrier is renting the truck they can technically put any driver they want in the truck, especially if the primary driver is taking extended time off. Another example is that some believe they can pay the employee driver minimum wage and then put the rest of the money towards the rental of the truck. However, it’s likely in this scenario that the IRS will consider this as shielding income. A third issue is that as an employee, the driver can no longer choose when to work, how much they want to work, what loads they want to haul, or any of the other myriad of reasons that drivers choose to be independent contractors instead of employees. There are other potential issues with the two-check system as well, but these are examples of the more common ones.

In the meantime...

The trucking industry will continue to work towards solutions because there is a significant concern that AB5 will quickly spread to other states like New Jersey, Illinois, Washington, and New York. The current administration would like AB5 and the PRO Act to be the rule of the land and would prefer all people to be employees and members of a labor union. As things stand today in regard to AB5, the most common options we see carriers offering their owner-operators with California residences are:

Option 1

Move residence out of California

Option 2

Get your own operating authority and drive for the trucking company’s brokerage division

  • Significantly increased costs

  • Significantly increased administrative responsibilities

  • Significantly increased compliance responsibilities

Option 3

Become an employee

Option 4

Deadhead out of California

  • Can deliver loads into California, but...

  • Cannot pick-up loads in California

Option 5

End relationship with carrier


With the Supreme Court refusing certiorari, AB5 is now law in California retroactive to January 1, 2020. Thus, if you are an owner-operator with a California residence, AB5 forces you to make immediate and significant changes to how you operate your trucking business. Here at ATBS, we are already seeing some of our clients moving their residences to other states like Nevada and Arizona. This is because owner-operators are independent contractors by choice and have no desire to become employees. Whatever steps you plan on taking, we hope it works out for the best. If you have any questions, feel free to give us a call or send us an email and we will assist you as best we can.

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5 comentarios

What happens if you have a CA based LLC (CA LLC 1), with 5 trucks, signed on to someone elses Authority (CA LLC 2) who is managing the entire process (i'm told it's called leasing). That authority (CA LLC 2) manages the independent contractors that drive CA LLC 1's vehicles and the CA LLC 1 pays and all expenses. CA LLC 1 is not a driver, but just the owner of the vehicles. Does that structure require that the drivers of the CA LLC 1 vehicles that are being operated by CA LLC 2's vehicles be considered employees or can they be independent contractors?

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John Davis
John Davis
13 jun 2023

Maybe Truckers should starve the US government of its supplies. That ought to wake up the Supreme Court.

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I understand a lot about AB5 but something that never was officially clarified by those that made it and pushed it is whether you have to meet ALL of the prongs of the ABC test, or just ONE to be ok. Original wording made it seem like ALL, then later it was condecendingly "clarified" to mean you only had to meet ONE of them to avoid the impact of AB5. So in the article above, it was noted the #2 is the one that gets truckers - they are truckers trucking for trucking companies. But shouldn't the fact that they set their own schedule and/or do trucking regularly for multiple companies cover them? I'm doing IC work in another industry,…

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ATBS Staff
ATBS Staff
22 mar 2023
Contestando a

Hi Bethany, thanks for your question. Please be advised that we are a tax and accounting company, not a law firm, so this blog is only informational and not legal advice.

As an owner-operator truck driver, you must pass all three prongs of the ABC to be an independent contractor in California. The B prong is the part of the test that owner-operators leased to trucking companies are unable to pass.

For more information please refer to this article from Scopelitis:

If you have any other questions please let us know.

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Robert John
Robert John
12 dic 2022

This quick guide is very successful for new as well as experienced drivers. I personally liked the way in which everything was explained very clearly.

I also want to add some value to this amazing article by means of the 6 ways to keep your trucking fleet safe

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