A family-owned trucking company and brokerage — California Intermodal Associates Inc. (CIA), headquartered in Commerce, California — is ceasing operations after nearly 25 years, citing the state’s independent contractor law.
CEO Gabriel Chaul said he recently notified customers that he is winding down operations.
“I blame AB5 for the main reasons our company is closing,” Chaul told FreightWaves on Tuesday.
He said all hope that his company would survive faded in March after a federal judge in California rejected trucking and trade associations’ legal challenges to stop enforcement of AB5, a controversial state law that severely restricts the use of independent contractors.
“California is a hostile place to operate a business,” he said. “This law has created a hostile operating environment and an environment of unfair competition.”
Chaul said his company complied with the law and switched his owner-operators over to become a company fleet of around 30 drivers.
“We had a hard time maintaining that number because they started falling off because they were enticed by our competition that builds its business with owner-operators,” he said.
Chaul said once he notified customers that the company was fully compliant with AB5, the phones stopped ringing.
“It seems like as soon as our customers knew that we were complying with the law and hiring employee drivers and had our own assets, our costs went up by as much as 30%,” he said. “There was no incentive to use CIA anymore.”
While his company complied with the law, it largely hasn’t been enforced and other companies that continue to use independent contractors are succeeding while he has made the tough decision to close, Chaul said.
“I owe about $1.8 million to the bank. I compromised myself to try and stay afloat because of this AB5, but if the state’s not going to enforce it, I’ve decided to hang it up,” Chaul said. “I’ve made all of these efforts and nothing’s going to change, so I can’t continue digging myself a deeper and deeper hole.”
Besides his current fleet of around 30 trucks, he also provided logistical support to the trucking community with a container yard and offered warehousing services.
In an email to FreightWaves, Fabian Ibarra, a dispatcher for another Southern California-based carrier, wrote, “CIA has been a cornerstone in the logistics landscape for nearly two decades.”
“Their impact was profound; if you’ve ever moved 53-foot containers from the rail in California, chances are you’ve crossed paths with CIA in your career journey,” Ibarra said.
Chaul said he is winding down operations this week but is uncertain of his next career move.
“I’m in my 50s and started this company with my dad 25 years ago,” he said. “I tried to do everything right and run a nice company, and this breaks my heart because I have to close it.”
This is a developing story.
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Efrain Navarro - Navarro Group LLC
I can see I wasn’t the only one that suffered the consequences of AB5 and its lack of enforcement. Back in October 2022 I had to seize operations too and was forced into bankruptcy. I had 20 trucks. I paid all my employees W-2, had workers comp, and carried those payroll costs that cost around 20-30% more just to comply with AB5. I thought that I was set and had a niche by being compliant that would bring me more business for doing so. I strongly believed at the time that everyone was going to be onboard and I would be one of the first ones to be AB5 compliant and would entice customers to want to go with a fleet that followed the law, but how wrong was I. Everyone else just grossly neglected to taking consideration that it was law being held up by the injunction while I thought I was ahead of the game but because of this it costed me everything. People ignored the law after going into effect. My company name was Navarro Trucking Group Inc. I also came out on FreightWaves in an article if you look me up. A few clients and brokers started to drop us and used owner operators instead because we had 20-30% higher rates to move the same freight. It became impossible to stay competitive. After restructuring company and other attempts to make our company profitable, it wasn’t enough to keep afloat. The only way would’ve been to go to an independent contractor model but not possible due to new law enacted at time. Fast forward today and I see that a lot of companies are not compliant with AB5 and how some have even reverted back to independent contractor model to move freight for cheap. It’s unfair competition because how can we compete with people who are ignoring the law that is not being enforced. I worked hard to get to 20 trucks and lost my company in major part because of AB5.
Fast forward today, I run just a 2 truck operation and has been very difficult to stay competitive being compliant. It’s going to be extremely hard to get back to 20 trucks. My hopes are to get back where I was but something needs to be done about this.
Fran Goldman
Most people have no idea how trucking companies closing will affect them. What a shame.
Ralph Hutchinson
When the fuel price went above a dollar fifty a truck no longer becomes a profitable tool. The government telling you how to run your business with absurd laws again makes running any independent business a money losing machine. The corporations want to grow and lobby for laws to break the independent contractors and basically starving them out of business.
SOSOMAN
To M.Albert> It’s kinda hard to have Trucks in Nevada going all the way to Los Angeles to the port to pick up ocean containers! The company doesn’t make money running empty! Drivers don’t make money pulling empty trailers! If only the TRUCK’N INDUSTRY could stick together and BOYCOTT that backward liberal state! France did,Italy did it even Canada stuck together for a common cause that BENEFITED their TRUCK’N INDUSTRY only the UNITED STATES can’t get together for the common lndustry!
Rob Kisielewski
Sad day when a business owner has to close his doors when having operated a quality business with integrity.
John
Chicom greaseball new scum nukum. This parasite traitor wants to continue the destruction he did during the planned-demic. Burn the state to the ground. And replace the labor force with illegals. And do the same as D.C. and form the Marxist one party rule.
Benjamin
The system sucks… it is just a manipulated move that only affects small companies to wipe them up, because the billionaire ones want more and more, it is the powerful people taking the control to have the monopoly of the industry and have us (Independents) as slaves of them!… local & regional government are Puppets of the power, anyway they will have a great piece of the cake by the end of the day!…. Free country isn’t?… We the people!… yeah right!