California Appellate Court Rejects ABC Test for Non-Wage-Order Claims

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Some positive news for those employers that retain independent contractors. On October 22, 2018, the California Court of Appeal for the Fourth Appellate District, held that the Dynamex “ABC” test (which we previously discussed here) to determine whether an independent contractor is an employee, only applies to wage order claims. But the case is a mixed bag and is a reminder that post-Dynamex, hiring parties bear a heavier burden to overcome the presumption that all workers are employees.

The case is Jesus Cuitlahuac Garcia v. Border Transportation Group, LLC, et al., involving plaintiff Jesus Garcia (“Garcia”), a taxi driver, who brought a wage and hour lawsuit against Border Transportation Group (“BTG”), with whom he drove taxi for several years. The trial court granted summary judgment for BTG, applying the decades-old multifactor S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989) test and finding Garcia was an independent contractor, not an employee entitled to wage order protection. The trial court’s reasoning included that Garcia controlled the means and manner of his work and “could and did market his business in his own name.”

Garcia appealed, during which time the California Supreme Court decided Dynamex, adopting the “ABC” test to determine whether a worker is an employee. Under this test, a hired individual is presumed an employee and the burden lays entirely on the hiring party to rebut that presumption by showing:

  • 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 such work and in fact;
  • that the worker performs work that is outside the usual course of the hiring entity’s business;
  • 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.

Turning first to Garcia’s wage order claims, the court focused on the “C” prong and found that BTG failed to carry its burden to show Garcia actually “provided services for other entities ‘independently’ of his relationship with BTG.” The court rejected BTGs reliance on Sebago v. Bos. Cab Dispatch, Inc., which focused the inquiry on whether the worker is permitted to establish an independent business operation. The court noted that Dynamex requires an “existing, not potential showing of independent business operation.” The court reversed summary judgment on the wage order claims.

But in positive news for hiring parties, turning next to Garcia’s non-wage-order claims, the court held the ABC test did not apply, and upheld summary adjudication as to those claims.[1] The court explained that the Supreme Court did not reject the more flexible, multifactor Borello test in all instances, and that Borello applies when a cause of action is predicated solely on the Labor Code, while the ABC test is properly limited to wage-order claims. The court reasoned that the Supreme Court “recognized that different standards could apply to different statutory claims…” and emphasized that “primacy of statutory purpose” should resolve “the employee or independent contractor question.” The court found “no reason to apply the ABC test categorically to every working relationship, particularly when Borello…remains the standard for worker’s compensation.” And because the parties did not identify a “a basis to apply Dynamex to [the] non-wage-order claims,” the court concluded that Borello “furnished the proper standard as to those claims” without analyzing their primary statutory purposes.

Orrick will continue to track interpretations of the Dynamex case as they are published. For the latest employment law updates, subscribe to the Orrick Employment Law and Litigation Blog.

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[1] Garcia’s non-wage-order claims included wrongful termination in violation of public policy, failure to pay overtime, and waiting time penalties.

9th Circuit: Employers Must Foot the Bill for Post-Offer Follow-up Medical Exams

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The Ninth Circuit recently sided with the Equal Employment Opportunity Commission (“EEOC”), holding that employers can’t require applicants to pay for follow-up post-offer medical exams.  Specifically, in EEOC v. BNSF Railway Company, No. 16-35457 (9th Cir. Aug. 29, 2018), the court affirmed that BNSF Railway Company (“BNSF”) violated the Americans with Disabilities Act (“ADA”) by conditioning the plaintiff’s job offer on his getting an MRI at his own expense.

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#MeToo One Year Later – Employers’ Responses to the Movement

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On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano. To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective. Part 1 reviewed the movement’s impact on sexual harassment claims in the workplace, Part 2 focused on the legislative reaction to the movement, and Part 3 below discusses how employers have responded to #MeToo.

Over the past year, the #MeToo movement has caused a seismic shift in our culture that continues to ripple through important aspects of our daily lives, especially the workplace. As we previously discussed, the #MeToo movement’s growing momentum has sparked rising trends in sexual harassment claims and lawsuits, as well as a significant increase in EEOC charges and enforcement efforts. In the past year, the EEOC revealed that it filed 41 lawsuits with sexual harassment allegations, which is a 50 percent increase from 2017. In addition, litigation and administrative enforcement of sexual harassment issues yielded nearly $70 million to the EEOC in 2018, up from $47.5 million the prior year. But newly filed lawsuits or administrative charges only reveal a part of the impact – claims of sexual harassment may have a devastating effect on those accused of wrongdoing and their employers, even if they lie far beyond any applicable statute of limitations, as today’s claims often do. Employers of all shapes and sizes are acclimating their policies and practices for the #MeToo era, as none can avoid the categorical shift in workplace culture that is slowly becoming the “new normal.” READ MORE →

#MeToo One Year Later: The Legislative Reaction

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On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano. To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective. Part 1 reviewed the movement’s impact on sexual harassment claims in the workplace, Part 2 below focuses on the legislative reaction to the movement, and Part 3 discusses how employers have responded to #MeToo. READ MORE →

Now We’ve Got Your Attention: Recent Amendments to SF Fair Chance Ordinance Give Job Applicants Right to Sue and Send Penalties Soaring

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San Francisco recently added significant teeth to its “Fair Chance” ordinance, which is designed to give applicants who have criminal histories a chance to get their foot in the door without being automatically disqualified.

This is the next step in the “ban the box” movement, for which several cities, counties and states have passed laws restricting employers from inquiring about a job applicant’s criminal background. The term “ban the box” refers to questions on an employment application that ask a job applicant about past convictions. Proponents of “ban the box” laws argue they will help remove unfair employment barriers to job applicants with criminal histories.

In California, San Francisco and Los Angeles have instituted “Fair Chance” ordinances that require employers to state on their job postings that an arrest or conviction will not automatically disqualify a qualified application from consideration from employment. Recent amendments to the San Francisco Fair Chance Ordinance went into effect on October 1, 2018. These amendments:

  • Expand the scope of the law to cover any employer with 5 or more employees. Previously, the law covered employers with 20 or more employees.
  • Prohibit employers from inquiring about a person’s criminal history until after a conditional offer of employment has been made.
  • Prohibit employers from considering any convictions for decriminalized behavior (e.g., marijuana related convictions). Previously, the law had allowed such inquiries for convictions that were seven years old or less.
  • Increase penalties for non-compliance from a per-violation maximum of $100 to $2,000.
  • Direct that penalties must be paid directly to affected employees. Penalties were previously paid to the City.
  • Creates a new private right of action for any employee or applicant whose rights have been violated. Previously only the City Attorney could sue to enforce the law.
  • Requires that covered employers display a new poster in the workplaces as of October 1, 2018.

In addition to fair chance ordinances like San Francisco’s, California employers must also be mindful of other recent legislation that will have an impact on the hiring process, including state-wide legislation enacted in July 2018 that prohibits employers from inquiring into the salary history of their applicants. More on that here.

As always, employers are well advised to reach out to Orrick counsel for assistance navigating this complex area of law.

#MeToo One Year Later: A Viral Hashtag with Lasting Effects

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On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano.  To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective.  Part 1 below looks at the movement’s impact on sexual harassment claims in the workplace, Part 2 focuses on the legislative reaction to the movement, and Part 3 discusses how employers have responded to #MeToo.

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Back to School! How to Navigate School-Related Leave for Employees

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With school back in session, employees may be asking for time off to go to their children’s school activities. Employers should know that several states and the District of Columbia require or encourage employers to provide employees with school-related time off. It is time to make sure employers are compliant with these laws. READ MORE →

California #TakesTheLead on Harassment Laws: What Does It Mean for Employers?

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As you’ve likely been monitoring, last month the California legislature passed several bills to Governor Brown for signature relating to sexual harassment. The hashtag #TakeTheLead emerged as a symbol reflecting California’s potential to become the state at the forefront of passing additional legislation characterized as increasing protection for women – and workers generally – in the face of the #MeToo movement. Late Sunday night, in the last moments before Governor Brown’s September 30 deadline, he vetoed the most contentious bill – AB 3080 – and signed into law many of the other pending bills. READ MORE →

Worth the Wait: NYS Clarifies Requirements for Sexual Harassment Prevention Programs

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One week before the October 9, 2018 deadline for compliance with the statewide sexual harassment prevention mandate (the “Mandate”), New York Labor Law § 201-g, New York State released revised model documents available on the state website: READ MORE →

Right of Co-determination of the German Works Council on Stock Options of U.S. Parent?

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The German Federal Labor Court (judgment of March 20, 2018 – 1 ABR 15/17) has recently clarified a matter of considerable practical relevance for U.S. companies offering stock options to employees of their Germany-based subsidiaries: Does the German subsidiary’s works council have a right to be involved when it comes to offering stock options? READ MORE →