California Carrier and Freight Brokerage Ceasing Operations, Blames AB5

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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