California Carrier and Freight Brokerage to Shut Down, Citing AB5

Family-owned California Intermodal Associates Inc. (CIA), a trucking company and freight brokerage based in Commerce, California, is ceasing operations after nearly 25 years. CEO Gabriel Chaul attributed the decision to the state’s independent contractor law, AB5, and California's challenging business environment.

"I blame AB5 as the main reason our company is closing," Chaul told FreightWaves. He recently informed customers of the decision to wind down operations.

In March, any hope of CIA’s survival diminished after a federal judge in California dismissed the trucking industry’s legal challenges against enforcing AB5, a controversial state law that limits the use of independent contractors.

"California is a hostile place to operate a business," Chaul said. "This law has created an environment of unfair competition and made it very challenging to operate."

CIA complied with the law, transitioning owner-operators into a company fleet of about 30 drivers. However, retaining drivers became increasingly difficult as many were attracted to competitors who still employed independent contractors.

"As soon as we informed our customers that we were fully compliant with AB5 and had employee drivers, the calls stopped coming in," Chaul explained. "Our costs rose by as much as 30%, and customers lost incentive to work with CIA."

Despite their efforts to adapt, the law has not been consistently enforced, leaving other companies that still use independent contractors at an advantage. Chaul now finds himself facing financial challenges, with around $1.8 million owed to the bank.

"I compromised myself trying to stay afloat under AB5, but if the state won’t enforce it uniformly, I’ve decided to step away," Chaul said. "I’ve made every effort, but nothing’s going to change, and I can't keep digging myself into a deeper hole."

Beyond the fleet, CIA also provided logistical support, including warehousing services and a container yard. In an email to FreightWaves, Fabian Ibarra, a dispatcher at another Southern California carrier, acknowledged CIA’s significant impact, stating: "CIA has been a cornerstone in the logistics landscape for nearly two decades. If you’ve moved 53-foot containers from the rail in California, you’ve likely crossed paths with CIA."

Chaul plans to wind down operations this week but is uncertain about his future. "I’m in my 50s and started this company with my dad 25 years ago," he said. "I tried to do everything right, and it breaks my heart to close it."