Skip to main content

California Supreme Court Issues Landmark Ruling Which Upends Independent Contractor v. Employee Test


Earlier this week, the California Supreme Court issued a ruling in Dynamex Operations West, Inc. v. Charles Lee, et al., and in doing so, established a new test to determine whether a worker is an independent contractor or an employee.  

The case revolved around a claim by two delivery drivers that claimed Dynamex (a nationwide package and document delivery company) misclassified its delivery drivers as independent contractors rather than employees.  Apparently, prior to 2004, Dynamex classified its drivers as employees (who performed similar pickup and delivery work as its current drivers performed).  That changed in 2004 when Dynamex adopted a new policy and considered all drivers to be independent contractors rather than employees.

In the lower courts, the workers prevailed.  However, Dynamex appealed.  In the California Supreme Court's ruling on Monday, the Court made a landmark ruling that could turn the tide in how successful workers are going forward when presenting similar claims.  In the Court's ruling, an "ABC test" was established to determine whether a worker was an independent contractor or an employee.  The ABC test stipulates that a worker must be considered an employee unless:  a) the worker is "free from control and direction over performance of the work"; b) the work is "outside the usual course of business for which the work is performed"; and c) the worker is "customarily engaged in an independently established trade, occupation or business."

Based upon this new standard created by the California Supreme Court (and currently used in other states such as Illinois and New Jersey), labor advocates and pro-employee groups have hailed the Court's decision as an opportunity for workers that claim they are misclassified as independent contractors a better likelihood of prevailing upon their claims.  

The question now turns to how companies like Uber, Lyft, GrubHub, and other gig economy related employers will handle this new ABC test.  For employers that have built their business model around the use of independent contractors, this ruling and new standard could threaten that business model going forward.  Of course employers could choose to classify their workers as employees and avoid a protracted legal dispute over independent contractor versus employee classification...however, I suspect many employers will be resistant to that idea and instead be faced with trying to combat the ABC test or simply closing up shop. 


For a copy of the Court's opinion:  http://www.courts.ca.gov/opinions/documents/S222732.PDF

Comments

Post a Comment

Popular posts from this blog

NLRB: Discussion Among Employees About Tip Pooling is Protected Concerted Activity

  This Advice Memorandum from the National Labor Relations Board’s Associate General Counsel, Jayme Sophir, addressed whether employees which discussed and complained about tip pooling at work constituted protected concerted activity. In relevant part, an employer in New York operated a chain of steakhouses.  While tip pooling was in place at these steakhouses, some of the employees objected to it on the grounds that it was not transparent and improperly divided tips among the workers.  Employees were told not to complain or talk to each other about the tip pool and were told that doing so would endanger their jobs.  Despite the employer later attempting to provide some clarity as to how the tips were being divided, rancor still existed among some employees.  At one point, the employees were told by a general manager that some employees that had been talking about the tip pool were “cleared out” and the employer would continue to do so. In the Advice Memorandum,...
Post a Comment
Read more

What I've Been Reading This Week

Recently, Equal Employment Opportunity Commission Commissioner, Chai Feldblum, had her re-nomination on the brink, after Utah Republican Senator Mike Lee took steps to block it .  Readers might have heard that late last week, Commissioner Feldblum's re-nomination quietly slipped away and she tweeted out a thank you to supporters and friends, acknowledging that her time at the EEOC was over.  While there has not been much in the way of a further update in regard to that ongoing saga, we wait to see how things will play out at the EEOC, now that it has lost a quorum until additional Commissioners are confirmed by the Senate. For the time being, there are other developments for readers to review this week.  In particular, I call attention to the article on managing a wage & hour audit by the Department of Labor as well as steps an employer can take to better ensure compliance with the ADA. As always, below are a couple articles that caught my eye this week. ...
Post a Comment
Read more

Senator Bernie Sanders To Introduce Bill Requiring Large Corporations To Pay For Federal Assistance Programs

Next week, Vermont Senator Bernie Sanders is set to introduce legislation which would require large employers such as Walmart, Amazon, and McDonald's to fully cover the cost of food stamps, public housing, Medicaid, and other federal assistance programs that their employees receive.  Senator Sanders has stated that the goal is to force these large employers to pay their employees a living wage and cut back on the nearly $150 billion in taxpayer dollars that go toward funding these federal programs every year. As for the specifics, a 100% tax on government benefits received would be imposed on government benefits received by workers at companies with 500 or more employees.  For instance, if a Walmart employee received $500 in food stamps, Walmart would be taxed $500. To call this proposed legislation groundbreaking would be an understatement.  I would expect that Senator Sanders, an Independent that caucuses with Democrats, is going to face an uphill battle gett...
Post a Comment
Read more