Labor & Employment Law Daily Wrap Up, EMPLOYEE STATUS—C.D. Cal.: Freight company could not satisfy one element of its affirmative defense, that its truck drivers were independent contractors, (Dec 5, 2025)

By Nicholas Kaster, J.D.

The court found that the business-to-business exception to the ABC test could apply even where the business service provider does not contract directly with the contracting business.

In a labor action brought by truck drivers against a freight forwarding company, a federal district court in California held that the company could not satisfy one element of its affirmative defense that the drivers were independent contractors. One element of the “ABC test” for determining employee status in California is that the worker performs work that is outside the usual course of the hiring entity's business. The court found that, if the ABC test applies, the company could not satisfy Prong B of the test. Therefore, the court granted partial summary judgment to the drivers as to Prong B only. The court denied the company’s motion for partial summary judgment in its entirety. Therefore, what remains for trial is the issue of whether the business-to-business exception applies (Espinosa v. CEVA Freight, LLC, No. 2:23-cv-00659-ODW (Ex) (C.D. Cal. Dec. 3, 2025)).

Independent contractors. Thirteen truck drivers brought an action against CEVA Freight, LLC, alleging violations of various federal, state, and municipal employment laws. CEVA asserted affirmative defenses, including that CEVA was not their employer, and that the truck drivers were independent contractors. Three Bellwether plaintiffs moved for partial summary judgment, asking the court to dismiss CEVA’s affirmative defenses and find that they are employees. CEVA also moved for partial summary judgment, asking the court to find that it met at least one part of California’s three-part test for employment classification, known as the “ABC test,” and that only the remaining two parts are issues left for trial.

CEVA Logistics comprises several different companies, including CEVA Freight. CEVA itself is considered a “freight forwarder,” meaning it is responsible for warehousing and “final mile” fulfillment services for goods moving through CEVA Logistics’s system. While the parties dispute the extent to which freight forwarding services make up CEVA’s overall services, it is undisputed that at least some of CEVA’s services include freight forwarding.

Before 2016, CEVA directly contracted with approximately seventy drivers, including the Bellwether plaintiffs. In late 2016 or early 2017, CEVA terminated its contracts with the Bellwether plaintiffs and other drivers carrying freight for CEVA in California. CEVA then entered into a Transportation Services Agreement (TSA) with Cargomatic, a transportation logistics company that provides drivers and equipment to freight carriers, such as CEVA, and a mobile application for driver use.

In the TSA, CEVA agreed to “make best efforts to tender to Cargomatic 90% of shipments.” In return, Cargomatic agreed to “make best efforts to arrange to transport such shipments.” To do so, Cargomatic represented and warranted to CEVA that it would “contract with motor carriers of property,” i.e., drivers. CEVA subsequently notified the drivers with whom it previously contracted that CEVA would no longer contract with them directly. Instead, these drivers, such as the Bellwether plaintiffs, would need to contract with Cargomatic independently as licensed motor carriers.

Bellwether trial. In this action, the drivers alleged violations of the federal FLSA, California labor laws, the California Unfair Competition Law (UCL), and City of Los Angeles municipal ordinances. Given the number of plaintiffs, the court ordered that the action proceed as a bellwether trial.

CEVA contended that it “was not Plaintiffs’ employer,” and that the drivers were independent contractors. The Bellwether plaintiffs sought partial summary judgment as to both defenses on the basis that CEVA was their employer as a matter of law. They argued that, in determining their employment status, the court must apply the ABC test as laid out in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018) and codified in California Labor Code section 2775. The Bellwether plaintiffs also asked the court to find that CEVA could not prove the second prong of the ABC test.

CEVA also sought partial summary judgment and asked the court to find that the ABC test did not apply, and that even if it did, CEVA proved at least the second prong of the test.

“ABC test”. Under California law, and for purposes of California wage orders, “any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order.” The hiring entity can overcome this presumption and thereby establish that a worker is not an “employee,” by establishing each of the three elements in the ABC test.

To carry its burden under the ABC test, a hiring entity must establish each of the following: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity's business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Business-to-business exception. CEVA contended that it need not satisfy the ABC test at all. First, it argued that, because Cargomatic satisfied the ABC test, the court should not also apply the test to CEVA. Second, it argued that the business-to-business exception, found in California Labor Code section 2776(a), applied here and removed this case from Dynamex and the ABC test.

The court, however, was unpersuaded by CEVA’s argument that it could not apply the ABC test here just because Cargomatic may already satisfy it. Neither the California Labor Code nor Dynamex contemplates such an exception, the court stated.

CEVA also argued that the ABC test does not apply to it because the drivers were engaged in a business-to-business relationship with CEVA. Under California Labor Code section 2776, Dynamex and the ABC test “do not apply to a bona fide business-to-business contracting relationship.” To establish the exception of a business-to-business contracting relationship, the contracting business (here, CEVA) was required to demonstrate that twelve elements are satisfied. The Bellwether plaintiffs argued that the business-to-business exception couldn’t apply here because it requires a “contracting relationship” between the contracting business (CEVA) and the business service provider (the drivers), and the drivers did not contract directly with CEVA. The Bellwether plaintiffs also argued that, even if the business-to-business exception could apply here, CEVA lacked the evidence to prove at least three of the elements required.

The court, however, rejected the first argument that the business-to-business exception did not apply. Based on both the plain statutory language and the legislative intent of section 2776, the court found that the business-to-business exception to the ABC test could apply even where the business service provider does not contract directly with the contracting business.

“Absence of evidence”. On the second argument, the court found that the Bellwether plaintiffs failed to show an “absence of evidence” as to three elements of the business-to-business exception. Consequently, there remained a genuine issue of material fact as to whether the business-to-business exception applies. Because the business-to-business exception could apply, said the court, there is a possibility that the ABC test will not govern the employment determination in this matter.

Having found that the ABC test could—but may not—apply, the court turned to the remaining issue: whether either party was entitled to judgment as to Prong B of the ABC test—whether the drivers performed work that was “outside the usual course of the hiring entity’s business.”

Outside the usual course of the hiring entity’s business. Both parties moved for summary judgment as to Prong B of the ABC test. The Bellwether plaintiffs argued that CEVA could not satisfy Prong B, while CEVA argued it did not have to and, in any event, it could and did. Prong B of the ABC test asks whether “the person performs work that is outside the usual course of the hiring entity’s business.” This element “reflects the distinction between workers who are truly independent contractors and those whose work involves the hiring entity’s usual course of business.”

The court noted that the Ninth Circuit has developed a three-party inquiry to guide analysis of Prong B: (1) whether the work of the employee is necessary to or merely incidental to that of the hiring entity, (2) whether the work of the employee is continuously performed for the hiring entity, and (3) what business the hiring entity proclaims to be in.

After examining all the factors and drawing all inferences in CEVA’s favor, the court found that the Bellwether plaintiffs operated squarely within CEVA’s usual course of business—freight transportation business—for the purposes of Prong B.

Economic inquiry. The undisputed evidence showed that, under both a common-sense inquiry and an economic inquiry, the Bellwether plaintiffs were necessary to CEVA’s business, the court determined. The undisputed evidence also showed that CEVA continuously used the Bellwether plaintiffs’ services, namely, truck driving. Taken together, this demonstrated that the Bellwether plaintiffs were fully within CEVA’s usual course of business. Accordingly, the court held that CEVA could not satisfy Prong B of the ABC test, and that the Bellwether plaintiffs were entitled to partial summary judgment on this issue. And because the ABC test is written in the conjunctive, such that a “finding of any prong against the hiring entity directs a finding of an employer-employee relationship,” the court found that CEVA could not satisfy the ABC test.

The court found that a triable issue remained regarding whether the ABC test applies in this case. It further found that, if the ABC test does apply, CEVA could not satisfy Prong B of the test. Therefore, the court granted, in part, the Bellwether plaintiffs’ motion for partial summary judgment as to Prong B only and denied the remainder of their motion.

The court further denied CEVA’s motion for partial summary judgment in its entirety. Therefore, with regard to CEVA’s second and third affirmative defenses, what remains for trial is the issue of whether the business-to-business exception applies.

The case is No. 2:23-cv-00659-ODW (Ex).

Judge: Wright, O.

Attorneys: Elizabeth R Gropman (Kaufmann and Gropman) for Roosevelt Espinosa. Alexander Miller Chemers (Ogletree Deakins Nash Smoak and Stewart) for Ceva Freight, LLC.

Companies: Ceva Freight, LLC

Cases: EmployeeStatus WageHour StateLawClaims CaliforniaNews