The Truth About AB5: How Trucking Companies Can Survive

The Problem With AB5 in Trucking

California’s AB5 law is here to stay. The U.S. Supreme Court decided not to hear the case against it, so trucking companies and independent contractors must find ways to adjust.

It’s frustrating, but sitting around complaining won’t help. What will help is finding real, legal solutions to keep independent trucking alive.

Even worse, AB5 isn’t just California’s problem. Other states are watching, and similar laws could be coming soon. If we don’t settle the contractor vs. employee debate, we’ll end up with 50 different laws plus federal rules—a nightmare for trucking companies and drivers.

So, how can trucking businesses survive and stay compliant?

Where Do We Draw the Line Between Employee and Contractor?

The biggest issue with AB5 is how it decides if a worker is an employee or an independent contractor.

The ABC Test
This is what California (and other states) use. The hardest part for trucking is the “B” rule, which says a worker must perform services outside the company’s usual business. But how do you separate a trucking company from its drivers? You can’t. This is why AB5 is such a problem.
The IRS 20-Point Test
A more detailed and flexible test, but states using AB5 don’t follow it.

Before we talk about solutions, we need to address a big problem in trucking.

The Abuse of 1099 Classification

There are some trucking companies that misuse the 1099 system.

Some hire drivers as independent contractors but give them company-owned trucks. This is not legal.

Others create lease-purchase scams—forcing drivers into bad deals where they never actually own the truck. These companies pretend drivers are business owners, but really, the companies control everything.

This needs to stop. Any real solution to the AB5 problem must include getting rid of these bad practices.

How Trucking Companies Can Stay Compliant and Survive

If AB5 is here to stay, trucking companies must protect themselves and their drivers. Here’s how:

Follow a clear test for contractors

If a driver owns their truck and pays for fuel, maintenance, and insurance, they are an independent contractor.

If a driver uses a company truck and can walk away at any time with no financial risk, they must be a W-2 employee.

This rule is simple, fair, and legal. It also matches the IRS 20-point test while removing the requirement to work for multiple companies (which DOT rules make difficult).

The key question is: Who takes the financial risk?

If the driver is responsible for all costs, they are a true owner-operator.

If they have no real financial risk, they should be a W-2 employee.

What Trucking Companies Should Do Right Now

We can’t change the law, but here’s what you can do today to keep running legally:

If you’re in California

Make sure independent contractors get their own motor carrier (MC) authority.

If you’re in another state

Keep an eye on your state’s laws. AB5-like laws are spreading, and your state could be next.

Stay ahead by following clear, legal contractor rules.

The Road Ahead: Staying Compliant and Thriving in Trucking

AB5 and similar laws aren’t going away, and ignoring them isn’t an option. Trucking companies that misclassify drivers risk lawsuits, fines, and business shutdowns. But that doesn’t mean independent trucking is over. The key to survival is understanding the law, following clear classification rules, and making sure owner-operators have full financial control of their trucks.

For years, the debate over the 1099 vs. W-2 classification has caused confusion and legal trouble. Some companies have abused 1099 classifications, putting drivers in bad lease deals or illegally calling company drivers “independent contractors.” Laws like AB5 are meant to stop that—but they also make it harder for legitimate owner-operators to stay independent.

If you run a trucking company, take action now. Review your driver classifications and ensure compliance. If you have 1099 drivers, make sure they own their trucks and handle their own expenses; if they don’t, switch them to W-2 before state laws catch up with you. If you’re in California, help your owner-operators get their own MC authority. If you’re in another state, stay ahead of the law—similar rules could be coming soon.

Should Your Drivers Be Paid 1099 or W2? Take the Quiz

Article – Can I Pay My Truck Drivers by 1099 or Do I Have to Pay by W2?

Trucking has always been about independence, but AB5 has changed the game. By following clear guidelines and making smart adjustments, you can protect your business, stay compliant, and help real owner-operators thrive.

Written by Mike Ritzema

Before founding Superior Trucking Payroll Service, Mike was the CFO of a trucking company with 80 trucks and a thriving brokerage. This experience gave him the perspective that a payroll solution has to make the lives of the office people better. All the solutions he has designed are to benefit everyone. Our company mission is to help trucking families and that includes the company owners, the drivers, and the office.