California Supreme Court Decision Alters Independent Contractor Misclassification Test – Dynamex Operations West. v. Superior Court (April 30, 2018)

Recently, the California Supreme Court issued a landmark decision in the case of Dynamex Operations West v. Superior Court.  The Dynamex court chose to essentially scrap the nearly 30-year old test used by California courts for determining whether a hired worker is regarded as an employee under the law, or instead of such worker is merely an independent contractor.  This has dramatic effects for whether or not the worker has protections or may be claims under California’s Wage Orders and Labor Code.

In replacing the decades-old “Borello control test,” which applied multiple factors to the determination of whether a worker qualifies as an independent contractor, the Dynamex Court instead adopted a much-simplified “ABC Test” which has been applied in various other jurisdictions around the country, including New Jersey and Massachusetts.

The revised “ABC” standard adopted by the Dynamex Court is summarized as follows:

First, the California Supreme Court interpreted California’s wage precedents and policy as placing the burden on the business to prove that a worker is an independent contractor, rather than placing the burden on the worker to prove he or she is an employee.  As a general matter, the worker will be presumed to be an employee.

Instead, to meet its burden under the ABC Test, a business must now establish each of the three ABC factors:

(1) that 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 for the performance of the work and in fact;

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

(3) that the worker is customarily engaged in an independently established trade, occupation, or business.

 

Under the ABC Test, the failure of a business to establish any one of the three factors means that a worker will be determined to be an employee and not an independent contractor as a matter of law.

The Court’s ruling specifically applies to claims stemming from California’s Wage Orders, and the Court technically left open whether this test would also apply to other statutes, such as those governing claims for failure to pay workers’ business expenses (for example, under Labor Code section 2802).  However, given the close overlap and interplay between California’s Wage Orders and its Labor Code provisions, it is likely that courts within the State will find the ABC test applicable to all such claims.

The ABC Test is far broader in its reach than the old Borello test, purposefully so the Supreme Court stated, and will likely result in many more workers being unable to meet the requisite test to be classified as an independent contractor.  For example, in many, many circumstances, it will be extremely difficult for a business to establish requirement “2” of the ABC Test, which mandates that in order to be considered an independent contractor, a worker must “perform work that is outside the usual course of the hiring entity’s business.”

To illustrate the meaning of the “usual course of business,” the Supreme Court gave the example that “when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having “suffered or permitted” (the California law definition of employment) the plumber or electrician to be working as its employee.

“On the other hand,” the Court said, “when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will thereafter be sold by the company,” or “when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes,” the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees” and not as independent contractors.

Misclassification claims held by workers can be extremely valuable, because related entitlements to overtime, unemployment insurance, social security, taxes, and other categories, can end up owed to the worker.  Workers unsure of whether they have been misclassified as “independent contractors” should contact Palay Hefelfinger APC today for a free consultation to discuss their rights.

U.S. Supreme Court to look at important employee rights issue this term: Should employment class action waivers be enforceable?

Overview

These days it seems like the United States Supreme Court has been getting a lot of attention, in the wake of brutal election season and with recent discussions about a potential Supreme Court nominee to fill the seat left vacant by the passing of the late Antonin Scalia.  Palay Hefelfinger APC also follows the Supreme Court developments closely, as the nation’s highest court can indeed impact workers’ rights and employment lawyers’ ability to fight for these important rights.

Recently, the U.S. Supreme Court agreed to hear and decide whether class action waivers in employment arbitration agreements violate the National Labor Relations Act (“NLRA”).  Many employers require as a condition of employment that their employees sign arbitration agreements, and often times these agreements contain language waiving the employee’s rights to have a jury trial or bring class actions to remedy some employer wrongdoing.  The Supreme Court’s action promises the much-anticipated resolution where different courts across the land have split on the issue.

The U.S. Supreme Court granted certiorari (agreed to take up the cases) in three lawsuits involving the same principal issue -- National Labor Relations Board v. Murphy Oil USA (No. 16-307); Epic Systems Corp. v. Lewis (No. 16-285); and Ernst & Young LLP v. Morris (No. 16-300), consolidating them for oral argument.

What Are Arbitration Agreements And Why Do Employers Want Them?

Arbitration agreements generally require employees to pursue claims in arbitration, before a private judge, rather than in court.  They have long been enforced pursuant to the Federal Arbitration Act (“FAA”). Due to a series of Supreme Court decisions, employers increasingly have included more and more employer-friendly provisions, including class and collective action waivers, in such agreements. However, the National Labor Relations Board (“NLRB”) has taken the position that employers violate the NLRA when they make such waivers in arbitration agreements a condition of employment.

Federal Courts across the country, in different circuits, have both aligned and departed from the NLRB’s point of view, creating a “split of authority.”  Recently in California, in Morris v. Ernst & Young, No. 13-16599, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016), the Ninth Circuit agreed with the Seventh Circuit and the NLRB, and ruled in a case that class action waivers do, in fact, violate the NLRA.

Class actions remain an important and vital tool in the fight for workers’ rights.  Oftentimes, a class action lawsuit is the only viable method to effectively correct an illegal corporate policy affecting hundreds (or thousands) of workers – i.e., strength in numbers.  Since Palay Hefelfinger APC only represents employees, we believe strongly that requiring workers to give up important, established legal remedies in order to hold a job is unfair and shifts the balance of power to corporate America.

Large companies prefer to take this “tool” – the class action device - out of the employees’ toolbox.  This is accomplished with arbitration agreements that contain class action waiviers, which allows companies to take on employee disputes one-on-one, in private proceedings, with a private judge.  It discourages collective action and also eliminates the risk of having a jury hear unfavorable facts about unlawful company practices. 

As such, we will watch eagerly to see what the Supreme Court decides in the matter!  Whatever the outcome, we will continue to represent employees in their fight for fair pay, safe and equal working conditions, one way or another.  Meanwhile, please contact a Palay Hefelfinger APC attorney with any questions about arbitration agreements, class actions, or any other employment law issues.

 

Supreme Court Strengthens Worker Rest Break Protections

The California Supreme Court recently ruled that employers in California cannot keep their workers "on call" during short (10 minute) rest breaks and must give up any control over how they spend that time.  The ruling came down in a lawsuit brought by security guards for ABM Security Services Inc.

The high court said the Company's policy of requiring the guards to keep their radios and pagers on and respond to calls during their rest periods violates state law.  

If you or others you know are aware of a similar violation, contact Palay Hefelfinger with any questions.  Penalties may include an additional hour of pay for the violation of the rest break obligations contained in California's Wage Orders.

Here is a link to the court opinion:  

Equal Pay for Equal Work - California's Fair Pay Act Explained

In 2015, California Governor Jerry Brown signed the California Fair Pay Act, which went into effect on January 1, 2016.  The Fair Pay Act amends California’s Equal Pay Act, to strengthen the protections available in the Act, which prohibit gender based wage inequality.  It is now the toughest equal pay law in the nation.

The most significant aspect of the Fair Pay Act is that it lowers the standard for comparing wages in order to establish gender based discrimination, by requiring that employers provide equal pay to male and female employees for “substantially similar work, when viewed as a composite of skill, effort, and responsibility” performed under similar working conditions.

For an employer to successfully defend against a claim of unequal pay under the Fair Pay Act, the employer must prove that the pay differential is based on one of four factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) a bona fide factor other than sex, such as education, training, or experience. The Fair Pay Act also requires the employer to demonstrate that each factor relied upon is applied reasonably, and that the one or more factors relied upon account for the entire differential.

The Fair Pay Act eliminates the “same establishment” requirement so that employers must now pay men and women the same regardless of their workplace location, assuming the employer has multiple work sites located in different areas.

Under the new law, employers must maintain employee records related to wages, wage rates, job classifications, and other terms and conditions of employment for three years.  The Act also expressly prohibits employers from discharging, discriminating or retaliating against any employee for invoking or assisting enforcement of the new law.  Available remedies to the aggrieved employee may include reinstatement and reimbursement for such discrimination or retaliation. There is a one-year statute of limitations period to bring such a claim.

The Fair Pay Act also prohibits an employer from preventing its employees from disclosing their own wages, discussing the wages of others, inquiring as to other employees’ wages (although the Act does not require the employer to disclose such information) or assisting another employee in asserting his or her rights under the Act.

Finally, the Fair Pay Act prohibits an employer from prohibiting an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under these provisions.

In summary, the new Fair Pay Act makes it easier for employees to establish pay discrimination claims, and more difficult for employers to show that wage differentials are legal.  Employees who are not sure if they have been subject to a violation of the Fair Pay Act or gender-based discrimination are encouraged to contact Palay Hefelfinger APC for a consultation.

California Raises Minimum Wage to $15 Per Hour


On April 4, 2016, Governor Brown signed Senate Bill 3, which will increase California’s minimum wage annually, reaching $15 per hour for employers with at least 26 employees by January 1, 2022.  This bill enacts the highest statewide minimum wage in the nation.

Therefore, for employers with at least 26 employees, California’s minimum wage will increase on the following schedule:

January 1, 2017 through December 31, 2017: $10.50 per hour.
January 1, 2018 through December 31, 2018: $11 per hour.
January 1, 2019 through December 31, 2019: $12 per hour.
January 1, 2020 through December 31, 2020: $13 per hour.
January 1, 2021 through December 31, 2021: $14 per hour.
Beginning January 1, 2022: $15 per hour.

Employers with 25 or fewer employees will follow a minimum wage schedule trails the above schedule by one year.  For these smaller employers, the minimum wage will be $10.50 per hour starting on January 1, 2018, $11 per hour on January 1, 2019, and continuing on this schedule until reaching $15 per hour on January 1, 2023.

The Governor has the ability to suspend the above minimum wage increases if certain economic factors indicate that the state is in recession.

Palay Law Incorporated notes that, because California’s "salary basis" test for exempt vs. non-exempt employees is directly tied to the state’s minimum wage, these increases will raise the threshold above which workers may be considered exempt.  Exempt employees must earn at least twice the state’s minimum wage for full-time employment, meaning that under the current $10 per hour minimum wage, exempt employees must earn an annual salary of $41,600 ($10 per hour x 2 x 40 hours per week x 52 weeks per year).  Under a $15 per hour minimum wage, the minimum annual salary jumps to $62,400 ($15 per hour x 2 x 40 hours per week x 52 weeks per year).

Employees who are not sure if they are receiving proper minimum wages, or if they are properly considered "exempt," are encouraged to contact Palay Hefelfinger APC for a consultation.