Recent Employment Law Decisions

California Supreme Court

In a major victory for the people of California, the California Supreme Court, in a unanimous decision, ruled that an expansive definition of “employee” should be used when applying the protections afforded under the Industrial Welfare Commission Orders. These protections encompass minimum wage requirements, maximum hours of work, as well as meal and rest breaks.

DYNAMEX OPERATIONS WEST v. SUPERIOR COURT

Under Dynamex, workers are employees unless the company shows, as its burden, that it exercised no control over the workers either as a matter of contract or as a matter of fact.

This decision insures that California workers will receive the rights the Legislature intended for them, regardless of any subterfuge to mislabel them as independent contractors.

A CLASS OF DELIVERY DRIVERS ALLEGED THAT THEY WERE MISCLASSIFIED AS INDEPENDENT CONTRACTORS

Two delivery drivers alleged that they, and a class of similarly situated plaintiffs, had been misclassified as independent contractors. After its denial of class certification was reversed by the Court of Appeal, the trial court granted class certification, relying on the definition of “employee” described in the IWC Wage orders.

“SUFFER OR PERMITTED TO WORK” IS THE CORRECT STANDARD FOR EMPLOYEES WHEN CONSIDERING ACTIONS PURSUED UNDER THE WAGE ORDER

Our Supreme Court described first the importance of insuring that workers are properly classified. Employers who misclassify employees as independent contractors avoid paying social security, workers compensation insurance, and payroll tax. The workers lack the protections of California law normally accorded to employees. These employers have an unfair advantage against their competitors who abide by the law and provide the various benefits required of them to their employees.

For these reasons, the Supreme Court determined it necessary to clarify that the definition of “employee” is broad when applied to the wage orders.

THE EMPLOYER MUST ESTABLISH 3 ELEMENTS TO SHOW THAT A WORKER IS AN INDEPENDENT CONTRACTOR

To vindicate these important state interests, the Court re-iterated a long-standing rule: the burden is on the employer, claiming a

worker to be an independent contractor, to establish that it is so. The worker has no initial burden, and the initial presumption is in favor of the worker’s proper classification as an employee. Any worker who is “suffered or permitted to work,” as described by the wage orders, will be deemed an employee.

Therefore, to show that a worker is an independent contractor under the wage orders, an employer must meet the “ABC” standard by affirmatively establishing all of the following: (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 of performance for such work and in fact, (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 the work performed for the hiring entity. Only if the hiring entity affirmatively establishes all of these factors will the worker be deemed an independent contractor for whom the wage orders do not apply.

The Supreme Court stated that the “suffered or permitted to work” standard is “exceptionally broad,” and most workers will be found to be employees under it. This, the Court said, is justified by “the fact that individual workers generally possess less bargaining power than a hiring business and that workers’ fundamental need to earn income for their families’ survival may lead them to accept work for substandard wages or working conditions.” Affording them the protection of the wage orders fulfills the “basic objective of wage and hour legislation and wage orders” to “ensure that such workers are provided at least the minimal wages and working conditions that are necessary to enable them to obtain a subsistence standard of living and to protect the workers’ health and welfare.”

CONCLUSION

California workers are presumed to be employees for the purpose of the wage orders, and companies have a high, affirmative burden to meet all of the ABC standards in order to prove otherwise. The Court here advanced the interests of California workers, as well as law-abiding California companies.

CELA INVOLVEMENT: CELA submitted an amicus brief and argued before the Supreme Court through Monique Olivier of Duckworth Peters Lebowitz Olivier. Counsel in the lower courts, as well as before the Supreme Court, included A. Mark Pope of Pope, Berger & Williams, as well as Kevin F. Ruf of Glancy Binkow & Goldberg, and Boudreau Williams and Jon Williams.

CELA wishes to thank its many colleagues who helped to bring about this well-reasoned and powerful decision: California Rural Legal Assistance Foundation, National Employment Law Project, Los Angeles Alliance for a New Economy, La Raza Centrol Legal, Legal Aid Society – Employment Law Center, Asian Americans Advancing Justice – LA and ALC, The Impact Fund, Alexander Community Law Center, UCLA Center for Labor Research, Women’s Employment Rights Clinic and Worksafe. Thanks to all for your hard work and a job well done.

California Supreme Court, filed April 30, 2018; Opinion by Cantil-Sakauye, C.J.

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Letter from the Editor
By Craig T. Byrnes, Esq.

The classic Foundation science fiction trilogy, written by Isaac Asimov in the 1950s, tells the story of the fall of the Galactic Empire. The Empire was a civilizing force, and its predicted fall heralds 30,000 years of darkness and barbarism throughout the galaxy.

To minimize the impact of the fall of civilization, psychohistorian Harry Selden establishes the Foundation, a colony of artists and scientists, who will maintain mankind’s grace and knowledge as they weather the storm of barbarism, to emerge in 1,000 years to bring order and humanity back to the galaxy.

California is akin to the Foundation for workers’ rights in this country, and this combined edition of the CELA Bulletin demonstrates it. The contrast between our Supreme Court’s view of wage and hour law in Dynamex Operations West v. Superior Court, and that of the United States Supreme Court in Encino Motorcars LLC v. Navarro, could not be more plain.

The Dynamex decision describes, at multiple points, the importance of wage and hour laws to the protection of California workers. It discusses the statutes and regulations as having been “adopted in recognition of the fact that individual workers generally possess less bargaining power than a hiring business and that workers’ fundamental need to earn income for their families’ survival may lead them to accept work for substandard wages or working conditions.” To guard against this, “such worker are provided at least the minimal wages and working conditions that are necessary to enable them to obtain a subsistence standard of living and to protect the workers’ health and welfare . . . . These [are] critically important objectives . . . . “

The US Supreme Court’s decision, on the other hand, contains no such discussion. There is no recognition of the need and critical importance of federal minimum wage law. Indeed, Encino Motorcars begins its analysis by talking about the exception to the rule, rather than the importance of the rule itself. The statute’s remedial nature is never mentioned, and never factors in to the majority’s decision.

In the Foundation stories, regression in technology and a loss of interest in advancing mankind’s welfare presaged 30,000 years of barbarism. Substitute fundamental workers’ rights for technologies, and the similarities are eerie. California continues to stand as a bulwark against the growing storm.

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