The Owner-Operator Independent Drivers Association (OOIDA) argues that California’s worker classification law, Assembly Bill 5 (AB5), violates the dormant Commerce Clause of the U.S. Constitution. They contend that the district court failed to properly apply Pike’s balancing test, which evaluates whether the burdens placed on interstate commerce outweigh the local benefits. The Commerce Clause is intended to prevent states from enacting regulations that create excessive barriers to interstate trade.

Paul Cullen Jr., OOIDA’s attorney, emphasized, “While Pike’s test has historically allowed states to regulate commerce, there is no financial or operational cost that leased owner-operators can bear to sustain their small businesses under California’s law.”

What is AB5?

California enacted AB5 in 2019, adopting the ABC Test to determine whether a worker should be classified as an employee or independent contractor. Under this law, a worker qualifies as an independent contractor only if the hiring entity can prove three specific conditions. The law was aimed at addressing widespread misclassification but has faced criticism for being overly rigid.

The “B” prong of the ABC Test requires that the worker’s services be outside the usual course of the hiring company’s core business. OOIDA argues that this provision effectively ends the leased owner-operator model within the trucking industry.

While drivers with interstate authority can continue to operate in California, and some intrastate leased operators qualify under a state’s business-to-business exemption, OOIDA pointed out that out-of-state leased owner-operators cannot meet this exemption due to conflicts with federal leasing regulations.

“Federal Truth in Leasing regulations mandate that motor carriers maintain exclusive control over leased trucks and their operation in interstate commerce,” Cullen explained. “This control cannot be reconciled with the B2B exemption, which requires the worker to be free of control — the two are fundamentally incompatible.”

California’s Defense

Samuel Thomas Harbourt, representing California, argued that truckers can still work within the state either by becoming employees or by obtaining the necessary authority as a motor carrier.

“OOIDA’s legal argument relies on the assumption that the ABC Test automatically classifies owner-operators as employees,” Harbourt stated. “But that’s not an accurate legal interpretation. The law simply states that owner-operators who meet certain criteria should be classified as employees.”

What’s Next?
With oral arguments concluded, the Ninth Circuit panel is expected to issue its decision in the coming months.