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Posts Tagged ‘#employee’

Navigating the Employee v. Independent Contractor Landscape in a Post-Dynamex World

Posted on: March 25th, 2019

By: Ariel Brotman

In a post-Dynamex world, hiring entities are finding it increasingly difficult to determine whether or not to classify a worker as an independent contractor or an employee.

On April 30, 2018, the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The Court established an ABC test requiring all parts to be met in order to classify a worker as an independent contractor. A hiring entity must prove: “(A) that the worker is free from the control and direction of the hirer 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 that involved in the work performed.” (Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903, 957.) 

The applicability of this seemingly strict ABC test was clarified in Garcia v. Border Tranportation LLC (2018) 28 Cal.App.5th 558. On October 22, 2018, the Court of Appeal released its opinion on Garcia v. Border Transportation Group, LLC. In Border Transportation, Plaintiff Garcia, a taxi driver, filed a complaint against Border Transportation Group, LLC for wrongful termination, overtime, waiting time penalties, unfair competition and various wage order claims based on his alleged misclassification as an independent contractor. Border Transportation filed a motion for summary judgment arguing that under the Borello test, which largely focuses on control, Garcia was properly classified as an independent contractor. The trial court agreed with Border Transportation. Garcia appealed the ruling granting the motion for summary judgment, and while the appeal was pending, the California Supreme Court released its opinion on Dynamex Operations West, Inc. v. Superior Court.

The Court of Appeal ultimately decided that in determining a worker’s status as an independent contractor, Dynamex only applies to wage order claims. As to all non-wage order claims, Borello remains the proper standard.  (Garcia v. Border Transportation LLC (2018) 28 Cal.App.5th 558, 570-71). Therefore, summary adjudication should not have been granted as to Garcia’s wage order claims but was proper as to his non-wage order claims.

Overall, although the Supreme Court has not ruled at this time, the Court of Appeal in Garcia v. Border Transportation LLC has provided an important exception to the strict Dynamex ABC test as it pertains to non-wage order claims. We will be paying close attention to further developments in the interpretation of this important exception.

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

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].

NLRB Doubles Down on ‘Joint Employer’ Standard Expansion

Posted on: October 2nd, 2015

By: Tim Holdsworth

On August 27, 2015, the National Labor Relations Board discarded thirty years of precedent and handed down a new and expanded definition of joint employer. See Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015). This decision comes on the back of the National Labor Relations Office of the General Counsel’s determination last year that McDonald’s USA, LLC, could be named as a joint employer in forty-three unfair labor practice complaints against its franchises, as previously discussed here.

In the August decision, the Board found that an entity is a joint employer if (1) there is a common-law employment relationship between the employee and employer, and (2) the entity possesses sufficient control over an employee’s essential terms and conditions of employment. In determining the entity’s control the Board announced two major departures from precedent in their inquiry, although the majority characterized these changes as merely “reaffirm[ing]” the standard articulated by the Third Circuit in N.L.R.B. v. Browning-Ferris Indus. of Pennsylvania, Inc., 691 F.2d 1117, 1119 (3d Cir. 1982). First, they will no longer require a joint employer to possess and exercise authority to control employees’ terms and conditions of employment, but instead will find sufficient control if the entity merely reserves this authority. Second, they will no longer require the entity’s control to be exercised directly and immediately. Instead, the Board declared that control exercised indirectly, such as through an intermediary, can establish the requisite control.

Applying this new standard, the Board found that Browning-Ferris Industries, the owner of a recycling facility, was a joint employer with Leadpoint, its subcontractor, for workers supplied by Leadpoint that would manually sort materials, clean screens and clear jams on the sorting equipment, and clean the facility.

Although this decision only sets an NLRB standard and has not yet been endorsed by a federal court, given the uncertain scope of what constitutes “indirect control” sufficient to determine an entity is a joint employer, it clearly reaffirms the agency’s effort to dramatically expand employer liability despite decades of contrary decisions. We might also see the NLRB’s standard gain traction in federal courts, where plaintiffs are already pushing for an expansion of employer liability to franchisors under different theories.

In sum, the Agency’s decision to expand the joint employer standard may have a profound effect not just on franchisors, but on labor relations and business relationships in general.

Georgia And California Increase Scrutiny Of Employee Loyalty And No-Rehire Provisions As Restraints Of Trade

Posted on: September 2nd, 2015

By: Mike Wolak

Restrictive covenants typically involve the “big three”: agreements not to compete, not to solicit the Company’s customers, and not to raid the Company’s staff upon separation from employment.  As a result, the language of the “big three” must be given careful thought when drafting the employee’s agreement.  Recent state and federal appellate opinions in Georgia and California make clear, however, that employee agreements and settlement agreements are being scrutinized more closely, such that even the more standard “loyalty” and “no-employment” provisions are being construed as restrictive covenants to determine whether they constitute unenforceable restraints of trade. 

For instance, in Early v. MiMedx Group, Inc., 768 S.E.2d 823 (Ga. Ct. App. 2015), the Georgia Court of Appeals invalidated a loyalty provision of a consulting agreement requiring the employee to “devote her full working time (not less than forty (40) hours per week) to [the] performance of [her] duties.”  Analyzing this provision as a restrictive covenant, the Court of Appeals held that the provision constituted an illegal restraint of trade, rather than a mere loyalty provision, because it prohibited the employee from performing any kind of work during the term of the agreement other than for MiMedx.  Indeed, MiMedx admitted during oral argument that the provision prohibits Early from “babysitting on the weekends or working in a bookstore,” even though such work is not related in any way to the type of enterprise in which MiMedx is engaged.  The Court of Appeals held that the loyalty provision contained “no limitation at all concerning either scope or territory,” which is required of restrictive covenants in Georgia.  Unfortunately for MiMedx, the consulting agreement was entered into prior to enactment of Georgia’s Restrictive Covenant Act, which applies to all agreements entered into on or after May 11, 2011 and is more favorable to restrictive covenants than Georgia’s common law.  Under the new law, this particular provision could likely be “blue-penciled” or judicially modified if it does not “promote or protect the purpose or subject matter of the agreement or relationship.”

Similarly, in Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the Ninth Circuit Court of Appeals held that the district court abused its discretion by categorically excluding a standard “no-employment” provision in a settlement agreement from the ambit of California’s non-competition/restraint on trade statute (Cal. Bus. & Prof. Code § 16600) on the sole ground that the provision did not constitute a covenant not to compete.  The Ninth Circuit concluded that nothing in Section 16600 or any California decisions explicitly limit the statute’s reach to traditional non-compete clauses or render the statute inapplicable to other contractual restraints on professional practice.  Accordingly, the Court remanded for a determination whether the “no-employment” provision – in which the former employee waived all rights to future employment with the Company “or at any facility that [the Company] may own or with which it may contract in the future” – constitutes a “restraint of a substantial character” under Section 16600.   

The MiMedx and Golden decisions are a strong reminder that employers should, in addition to ensuring their standard “big three” restrictive covenants comply with applicable state law, also carefully examine their employment, consulting, and severance agreements to ensure that loyalty, best efforts, no-rehire, and other similar provisions comply with the applicable restrictive covenant law and are not considered an unenforceable restraint on trade.   In doing so, employers should keep in mind that restrictive covenant laws vary widely by state, thus requiring drafting of applicable provisions on a state-by-state basis.  Additionally, restrictive covenant law is evolving in many states, requiring agreements to be updated regularly to ensure compliance with existing law.