Leased Owner-Operators, Employee Drivers, and Motor Carriers are very Different Legal Entities Explained OOIDA in its Lawsuit Against AB 5

Briefing has been completed, and oral argument is set for April 9, 2025.

Independent leased owner-operators play a crucial part in keeping America’s trucking industry moving, explained CullenLaw attorneys to the U.S. Court of Appeals for the Ninth Circuit in OOIDA v. Bonta et al., No. 24-2341. OOIDA’s arguments center around the allegation that AB 5’s ABC test unreasonably burdens interstate commerce in violation of the Constitution because it prohibits owner-operator truckers from working as independent contractors for motor carriers in California.

In their responses, California and the Teamsters argued that independent contractor truckers could just, instead, become employee drivers or get their motor carrier authority and that the burden or sacrifice in doing so is not unreasonable under the Constitution. They also argued that independent contractors could continue to be independent contractors under AB 5’s business-to-business exemption. OOIDA’s reply brief rebutted both assertions.

Being an employee driver, running a small business as a leased owner-operator, and operating as a motor carrier with federal authority are not interchangeable truck-driving jobs.

According to the State, because independent owner-operator truckers can still work in California as employees or motor carriers, AB 5 doesn’t unreasonably burden interstate commerce. OOIDA, in response, explained to the court in detail the significant differences between employee drivers, leased owner-operators, and registered motor carriers. Each distinct legal entity serves a different and important function in the long-haul trucking industry. Employee drivers who do not run their own businesses and lack autonomy and entrepreneurial opportunity differ significantly from independent owner-operators who operate as small businesses whose success and profitability are determined by the owner-operators’ control over and decision -making for their businesses. Operating a motor carrier has significantly higher legal, regulatory, and business responsibilities than those of owner-operators. It is precisely because of these differences that hundreds of thousands of drivers across the country have chosen and prefer to operate as independent owner-operators. OODIA argues that the effective ban on independent owner-operators from operating in California unreasonably burdens interstate commerce in violation of the dormant Commerce Clause of the Constitution.

AB 5’s business-to-business exemption cannot be used by interstate motor carriers and their independent contractor drivers.

 The State also claims that drivers could still operate as independent contractors under AB 5’s business-to-business exemption. But, as OOIDA highlighted, the State did not actually claim that the exemption would allow a leased owner-operator to be an independent contractor for a motor carrier. OOIDA also argued that, because the business-to-business exemption’s requirements conflict with the federal rules governing interstate leased operations, the exemption would only be available to in-state California drivers and, therefore, discriminates against interstate operators. OOIDA argued that this discriminatory treatment violates the U.S. Constitution’s dormant Commerce Clause and the Equal Protection Clause. OOIDA asked the court to prevent the State from enforcing AB 5 in the interstate trucking industry and make the law’s exemption available to interstate operations.

OOIDA’s lawsuit does not ask the court to abandon California’s protections for misclassified truckers.

 Finally, OOIDA made clear to the court that the relief it seeks would not undermine California’s interest in addressing true misclassification of truck drivers. Rather, a ruling in favor of OOIDA would simply result in these truckers being classified under the long-standing Borello worker classification test. Unlike AB 5, the Borello test permitted independent contractor owner-operators to lease with motor carriers but also addressed the problems of misclassified drivers, where motor carriers labeled their drivers as independent contractors but denied them sufficient discretion over their own operations to be considered truly independent. The Teamsters argued in their brief that Borello successfully addressed trucker misclassification in 97% of such cases.

Next up: CullenLaw attorney Paul Cullen Jr. will argue OOIDA’s case to a panel of Ninth Circuit judges in Pasadena, California, on April 9, 2025.

Related Resources

Read Plaintiff-Appellant, OOIDA’s opening brief, OOIDA v. Bonta, Et Al, August 5, 2024.

View the answering brief from State’s Defendants-Appellees, November 4, 2024.

Read the Appellee, Teamsters’ answering brief, November 4, 2024.  

View Plaintiff-Appellant, OOIDA’s reply brief, December 24, 2024.

For more information about AB 5, please see our analysis here, and for more information about this litigation, please contact info@cullenlaw.com.