Tuesday, May 1, 2018

California Knows Its ABCs

Yesterday, the California Supreme Court issued what is likely to be a bombshell decision in Dynamex Operations v. LeeDynamex involved a wage claims brought by a driver under California law. The employer defended with the oft-used (and often successful) argument that the driver and his similar colleagues were independent contractors, not employees. You can check out the decision for the facts, but they will be very familiar to those who spend any time looking at this area. What is more important is how the court analyzed them.

In Dynamex, the court decided to change its standard for determining whether a worker is an employee or independent contractor under the part of the state wage statute that defines "employ" as  "to suffer or permit work" (there are two other definitions of "employ"). In particular, it adopted what is referred to as the "ABC test." Under this rule, a worker is presumed to be an employee unless the purported employer can establish three factors. Because of its importance, I'm going to quote the court's formulation, while editing the layout for easier reading:

This [ABC] standard, whose objective is to create a simpler, clearer test for determining whether the worker is an employee or an independent contractor, presumes a worker hired by an entity is an employee and places the burden on the hirer to establish that the worker is an independent contractor. Under the ABC standard, the worker is an employee unless the hiring entity establishes each of three designated factors:

(a) that the worker is free from control and direction over performance of the work, both under the contract and in fact;

(b) that the work provided is outside the usual course of the business for which the work is performed; and

(c) that the worker is customarily engaged in an independently established trade, occupation or business (hence the ABC standard).

If the hirer fails to show that the worker satisfies each of the three criteria, the worker is principal federal wage and hour legislation.

Although it remains to be seen how soon and how big an effect this decision will have, I'm not going out on a limb by predicting that this represents a major change. The ABC test is clearly broader than the FLSA's "economic realities" test, so at a minimum more California workers will enjoy protection under the relevant statute. But California's size and the fact that this is likely to impact gig work could lead to a shift in how some companies classify and pay their gig workers in other states. Time will tell  . . . .

-Jeff Hirsch



Labor and Employment News, Wage & Hour | Permalink


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