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As we previously reported here, in Dynamex Operation West, Inc., v. Superior Court., (“Dynamex”), the California Supreme Court embraced a standard that presumes all workers are employees instead of independent contractors, and places the burden on the employer classifying an individual as an independent contractor to establish that such classification is proper under the newly adopted “ABC” test.

It has been six months since the California Supreme Court adopted the ABC test and there are many unanswered questions regarding the test, including what wage claims it would apply to. Last week, a California Court of Appeal ruled in Garcia v. Border Transportation Group, LLC that the ABC test applies only to claims brought under Industrial Welfare Commission (“IWC”) Wage Orders. Jesus Cuitlahuac Garcia (“Garcia”) filed a wage and hour lawsuit against his employer, Border Transportation Group, LLC alleging claims for unpaid wages, failure to provide meal and rest breaks, failure to furnish itemized wage statements, wrongful termination, waiting time penalties, and an unfair competition claim. IWC was established to regulate wages, hours and working conditions in California and has established various “wage orders,” which guarantee, among other things, an employee’s minimum wage, maximum hours of work, overtime compensation and basic working conditions (such as minimally required meal and rest breaks), for all occupations and industries in California. Border Transportation moved for summary judgement on the basis that Garcia was an independent contractor, not an employee—the trial court agreed and granted the employer’s motion for summary judgment.

Garcia appealed the decision and, while Garcia’s appeal was pending, the California Supreme Court issued the Dynamex decision. The Court of Appeal, applying Dynamex, determined that the employer failed to demonstrate Prong “C” of the ABC test—that Garcia had an independent established business. The Court of Appeal also held that the Dynamex ABC test should not be applied to non-wage order claims, such as Garcia’s claims for wrongful termination, waiting time penalties, and the unfair competition claim. Instead, the Court of Appeal held that the widely used standard in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (“Borello”) applies to non-wage-order claims for determining whether workers are employees or independent contractors and upheld summary judgment on Garcia’s claims for wrongful termination, waiting time penalties, and an unfair competition claim.

Prior to Dynamex, the common law test to determine whether a worker was an employee or independent contractor consisted of a multi-factor test set forth in Borello.  Under the Borello multi-factor standard, the worker has to demonstrate that the employer has sufficient control to find that there is an employee-employer relationship. In contrast, under the ABC test, the employer bears the burden of proving that the worker satisfies all three factors of the ABC test: A) the individual is free from the employer’s control and direction; B) the individual performs work that is outside the usual course of the employer’s business; and C) the individual has an independently established trade, occupation, or business.

COUNSEL TO MANAGEMENT:

The Dynamex decision has left numerous employers in an uneasy position given the lack of clarity and case law on the subject. For now, clarity has been provided that Dynamex applies only to wage order claims. Employers who have workers classified as “independent contractors” should review that practice and ensure that they can rebut the Dynamex standard presumption. Should you have any questions about the effect of the Dynamex decision and whether your workers are properly classified, please contact the experts at The Saqui Law Group.

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