California AB5
California AB5 is the 2019 California law that codified the ABC test from the Dynamex decision, presuming workers are employees unless the hiring business proves all three parts of the test.
What it requires
A worker is an employee unless the hiring entity shows the worker is free from its control, performs work outside the usual course of its business, and is customarily engaged in an independent business of that kind. Misclassification exposes companies to unpaid wages, overtime, payroll taxes, penalties and PAGA claims. The law has applied to motor carriers since the US Supreme Court declined review in June 2022. App-based delivery drivers are governed instead by Proposition 22, which the California Supreme Court upheld in 2024.
Why it matters
AB5 changed how fulfillment and delivery networks in California use contractors. Because moving freight is the usual course of a trucking company's business, leased owner-operators running under a carrier's authority are hard to treat as contractors, which pushed carriers toward employee drivers or brokering loads to independent carriers. For example, a regional last-mile provider in Los Angeles that pays contractor drivers to run its routes risks reclassification claims unless the drivers operate genuinely independent businesses or fall under Proposition 22 as app-based drivers.
Related laws
Sources
- California Labor and Workforce Development Agency: ABC test labor.ca.gov
- California Legislative Information: AB 5 (2019) leginfo.legislature.ca.gov
Not legal advice.