Espinosa v. CEVA Freight, LLC: California Federal Court Holds Drivers Within Usual Course of Freight Forwarder’s Business Under ABC Test

December 3, 2025 | United States District Court for the Central District of California | Order on Cross-Motions for Partial Summary Judgment

Executive Summary

In Espinosa v. CEVA Freight, LLC, 2025 WL 3481402 (C.D. Cal. Dec. 3, 2025), Judge Otis D. Wright II addressed whether truck drivers operating through an intermediary logistics platform were properly classified as independent contractors under California law. Thirteen drivers alleged violations of the Fair Labor Standards Act, California wage laws, and related statutes, asserting they were employees rather than independent contractors. CEVA contended it was not their employer and that the drivers were properly classified. On cross-motions for partial summary judgment in a bellwether posture, the court held that if California’s ABC test applies, CEVA cannot satisfy Prong B—whether the workers perform work outside the usual course of the hiring entity’s business. The court rejected CEVA’s arguments that federal motor carrier regulations displaced the ABC analysis and that use of an intermediary (Cargomatic) insulated it from employee classification exposure. However, the court left for trial whether the business-to-business exception to the ABC test applies. The ruling is significant for layered logistics and intermediary-based models operating in California.

Relevant Background

CEVA Freight operates as a freight forwarder within a larger global logistics network. Prior to 2016, CEVA contracted directly with approximately seventy drivers in California. In late 2016 or early 2017, CEVA terminated those direct contracts and entered into a Transportation Services Agreement with Cargomatic, a transportation-logistics company that supplies drivers and equipment through a mobile application platform.

Under the revised structure, CEVA coordinated customer pickups and deliveries, Cargomatic arranged drivers, and drivers (including the bellwether plaintiffs) formed DBAs and obtained motor carrier licenses to contract through Cargomatic. CEVA invoiced and collected payment from customers for delivery services, while Cargomatic handled driver compensation.

Plaintiffs alleged that this restructuring effectively inserted an intermediary between CEVA and drivers in order to avoid California’s wage and hour laws. CEVA asserted affirmative defenses that it was not plaintiffs’ employer and that plaintiffs were independent contractors.

The parties agreed that the bellwether phase would focus on the threshold classification issue.

Decision

The court first addressed which test governs classification. Under Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018), and California Labor Code § 2775, workers are presumed employees unless the hiring entity proves all three elements of the ABC test:

(A) freedom from control;
(B) work outside the usual course of the hiring entity’s business; and
(C) engagement in an independently established trade.

CEVA argued that the ABC test should not apply because Cargomatic satisfied the test, and because federal motor carrier regulations defined the parties’ roles separately. The court rejected both arguments.

Relying on Vazquez v. Jan-Pro Franchising International, Inc., 986 F.3d 1106 (9th Cir. 2021), the court emphasized that inserting a contractual intermediary does not necessarily shield a putative employer from ABC scrutiny. The court noted that California law does not create an automatic exemption merely because another entity in the chain also satisfies classification requirements. Allegations that a company “utilizes a proxy” to structure relationships do not, standing alone, remove the arrangement from ABC analysis.

The court also rejected CEVA’s argument that Federal Motor Carrier Safety Administration regulations displaced state classification law. It observed that the federal regulatory framework addresses safety concerns, not employee classification standards, and that courts have consistently declined to treat such regulations as preempting California’s wage-order framework.

However, the court declined to hold that the ABC test necessarily governs. It found a triable issue as to whether the statutory business-to-business exception under Labor Code § 2776 applies. Because that exception requires satisfaction of twelve enumerated elements, and factual disputes remained, the applicability of the ABC test itself was left for trial.

Notwithstanding that unresolved issue, the court proceeded to analyze Prong B of the ABC test and granted summary judgment in plaintiffs’ favor on that prong.

Under Vazquez, Prong B examines whether the workers perform work that is outside the hiring entity’s usual course of business. The Ninth Circuit directs courts to consider:

1. Whether the work is necessary or merely incidental to the hiring entity’s business;
2. Whether the hiring entity continuously relies on that work; and
3. How the hiring entity describes its business.

Applying those factors, the court found no genuine dispute of material fact.

First, drivers transporting freight were necessary—not incidental—to CEVA’s freight-forwarding operations. CEVA’s business model depended on the physical movement of cargo, and it derived revenue from those deliveries. Without drivers, CEVA would be unable to provide “end-to-end logistics solutions” to customers.

Second, CEVA had continuously relied on drivers to move freight for nearly a decade. The use of Cargomatic as a coordinating intermediary did not alter the underlying continuity of reliance on drivers’ services.

Third, CEVA described itself as operating in freight transportation and logistics. The court concluded that truck driving is squarely within, not outside, the usual course of a freight transportation business.

Because the ABC test is conjunctive, failure to satisfy any one prong defeats independent contractor status. The court therefore held that if the ABC test applies, CEVA cannot meet its burden.

The remaining issues for trial include whether the business-to-business exception applies and, if so, whether classification should instead be analyzed under S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).

Looking Forward

This decision is significant but must be carefully cabined.

First, it arises under California law, which remains among the most demanding jurisdictions for worker classification. The court did not announce a new test; it applied the established ABC framework and Ninth Circuit guidance from Vazquez.

Second, the ruling does not hold that layered or intermediary-based models are per se unlawful. It leaves open whether the business-to-business exception applies—a statutory carveout that, if satisfied, would remove the case from the ABC test entirely.

Third, the decision turns heavily on Prong B’s “usual course of business” inquiry. Where a company’s core business is transportation of freight, drivers performing that function will face heightened scrutiny under California’s ABC framework. Businesses operating in other sectors, or using contractors for genuinely peripheral services, may present materially different facts.

That said, the case reinforces several practical points for franchisors and system operators operating in California:

• Courts will examine substance over structure when evaluating layered models.
• Use of a broker or intermediary does not automatically eliminate exposure under ABC.
• Federal regulatory schemes do not displace California’s wage-order classification standards.
• Prong B remains the most vulnerable element for companies whose contractors perform their core service.

For franchisors and brand systems, the key compliance question remains: is the contractor performing work that the brand holds out as its primary offering? If so, California’s ABC test presents meaningful risk unless a statutory exception clearly applies.

This decision does not expand the ABC test. It applies existing doctrine to a freight-forwarding model. But it serves as a reminder that in California, structural layering alone is unlikely to resolve classification risk at summary judgment.

This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.

Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.

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