California Courts Continue To Alter The Independent Contractor Landscape

On April 30, 2018, the California Supreme Court issued a unanimous ruling
in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Dynamex). Dynamex
defined a three part “ABC test”, simplifying the Court-established independent contractor test in
SG Borello & Sons v. Department of Industrial Rel. (Borello) (1989).

Dynamex was the result of defendant company converting all of its California drivers to
independent contractors as a cost savings measure in 2004. Classifying workers as independent
contractors removes an employer’s obligation to comply with minimum wage and overtime laws
while also shifting the risk of doing business onto the worker. The Court in Dynamex embraced
the general perspective that misclassifying workers as independent contractors is harmful and
unfair to workers and the public as a whole.

Taking from the Borello test, the Dynamex court shifted the burden to the employer and defined
three requirements to satisfy in order to prove an employee is properly classified as an
independent contractor: (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) that the worker is customarily engaged in an
independently established trade, occupation, or business of the same nature as the work
performed. An employer must satisfy all three requirements before an employee would need to
rebut an employer’s classification.

These defined requirements address a common issue in recent hiring trends and the “gig
economy” (i.e. app related, per project hiring). Companies will have a more difficult time
unfairly forcing an individual worker to bear the burden of being their own business while the
companies continue to maintain their right to set pay and control work parameters.

A new decision on October 22, 2018, Garcia v. Border Transportation Group, LLC (Garcia),
analyzed the California Supreme Court’s decision in Dynamex. The Garcia held that a plaintiff’s
wage order related claims (i.e. unpaid wages, failure to pay minimum wage, failure to provide
meal and rest periods, etc.) are governed by the “suffer or permit to work” standard set forth in
Dynamex. Plaintiff’s remaining claims for overtime, wrongful termination and waiting time
penalties under Labor Code section 203, are not covered by the wage orders, and therefore are
subject to the Borello test, citing that Dynamex did not actually overturn Borello.

Overall, the independent contractor classification continues to be refined in the current “gig
economy” employment environment. If you or someone you know is misclassified or believe to
be misclassified as an independent contractor, contact Srourian Law Firm to speak with an
attorney about your rights.