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Posts Tagged ‘Dynamex Operations West’

Independent Contractor Or Employee?

Posted on: September 20th, 2018

By: Marshall Coyle

The California Supreme Court has established an “ABC test” that could make it extremely difficult for the state’s truckers to use independent contractors. In Dynamex Operations West Inc. v. Charles Lee, (Case S222732, April 30, 2018) the Supreme Court endorsed what is called the three-pronged ABC test legal standard.

In Dynamex the lawsuit involved allegations by drivers that Dynamex, a nationwide package and document delivery company, had misclassified its delivery drivers as independent contractors rather than employees. The high state court affirmed the appeals court ruling that supported the workers, endorsing what is called the three-pronged ABC test legal standard.

To be classified as an independent contractor, the ABC test requires that: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

The state Supreme Court said that in recent years federal and state regulatory agencies have declared that the misclassification of workers as independent contractors rather than employees is a serious problem that deprives federal and state governments billions of dollars in tax revenue and millions of workers of labor law protections.

“On the one hand, if a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours and working conditions of employees,” the court wrote in its opinion.

“On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.”

If you have any questions or would like more information, please contact Marshall Coyle at [email protected].

California’s New Independent Contractor Test

Posted on: July 11th, 2018

By: Christine Lee

On April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court, No. S222732, in which the Court adopted an extremely broad view of workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This decision will undoubtedly lead to increased litigation challenging classification of workers across the state as employers will now have a much higher burden to defeat such claims.

Under the new “ABC” test set forth in Dynamex, a worker will be presumed to be an employee unless the hiring entity proves all of the following:

(A) 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 and in fact; and

(B) The worker performs work that is outside the usual course of the hiring entity’s business; and

(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work he or she performed for the principal.

An employer’s failure to establish any one of the three factors will result in a determination that the worker is an employee as a matter of law.  The Court’s ruling specifically applies to claims asserted under the IWC Wage Orders, which impose obligations related to minimum wages, overtime, and required meal and rest breaks. It is presently unclear how the case applies to claims arising under other statutes.

We encourage all companies doing business in California to immediately evaluate classification of outside contractors or vendors.  Under Dynamex, the vast majority of persons performing services for a company will be considered employees if they are performing work within the usual course of the company’s business, even if those individuals act autonomously and are free from control or direction of the hiring entity.

Therefore, we strongly encourage employers to consult with counsel to evaluate and consider reclassifying independent contractors or risk finding themselves on the losing end of an expensive and painful misclassification case.

If you have any questions or would like more information, please contact Christine Lee at [email protected].