United States: Flurry Of Recent Developments On The Dynamex Front

Last Updated: July 11 2019
Article by Benjamin M. Ebbink

It's been tough to keep up with developments concerning the fallout from the Dynamex case and California's new ABC test for determining employee/independent contractor status.  The past few months have seen several recent regulatory and judicial developments, while high-stakes negotiations over legislative relief continue in Sacramento.

9th Circuit Says Dynamex And ABC Test Should Apply Retroactively

On May 2, the 9th Circuit Court of Appeals rejected the call from businesses to apply Dynamex only on a go-forward basis, clearing the way for retroactive application of the new standard. That ruling created headaches not only for businesses in the gig economy but for just about any business that utilizes contract labor. In a longstanding misclassification battle against a janitorial franchising operation, the appeals court ruled in favor of the workers and concluded that the ABC test should be applied to the case that has been ongoing since 2008.

The business argued that several justifications existed to reject retroactive application: its long-standing reliance on the former misclassification standard; the fact that the changes was substantive in nature; and overall effect the change would have on the fair administration of justice. The court had none of it. It noted:

  • The California Supreme Court rejected the chance to re-hear the Dynamex case after the parties had explicitly called for it to rule on the retroactivity question. "By denying the petition, even without comment, the court strongly suggested that the usual retroactive application, rather than the exception, should apply to its newly announced rule," the 9th Circuit said. "To be sure, a denial of a request for clarification is not a holding on the merits. But in an unusual case such as this, it is a data point for us to consider in light of California's general tradition that judicial pronouncements have retroactive effect."
  • The new test "remains faithful" to the fundamental nature of California's wage and hours law, which is to remedy the problem of workers not being paid the amount to which they are entitled. It said that such remedial legislation must be liberally construed in a manner that services its remedial purpose.
  • Most shockingly, the 9th Circuit said that the adoption of the ABC test was a "clarification rather than a departure from established law."

DLSE Opinion Letter Extends Dynamex Reach

The very next day, the Division of Labor Standards Enforcement (DLSE) issued an opinion letter that concluded the ABC test applies both to IWC Wage Order Claims and certain Labor Code provisions that enforce Wage Order requirements. According to the opinion letter, "because wage order provisions are not independently actionable..., the obligations imposed by the wage orders do not appear only in the wage orders themselves. Wage order obligations are also imposed by certain Labor Code provisions, which serve to enforce the wage orders." 

Therefore, the DLSE concluded that Labor Code provisions that implicate or "derive" from employer obligations under the IWC Wage are also subject to the ABC test. The agency specifically mentioned the following: 

  • minimum wage (Labor Code sections 1182.12 and 1197);
  • overtime (Labor Code sections 510 and 1194);
  • liquidated damages (Labor Code section 1194);
  • meal and rest periods (Labor Code sections 226.7 and 512;
  • itemized wage statements (Labor Code section 226); and
  • expense reimbursement claims (Labor Code section 2802).

With respect to "waiting time" penalties under Labor Code section 203, the DLSE essentially said: it depends. "Where section 203 serves to enforce the underlying minimum wage and overtime obligations of the wage orders," the agency said, "application of the ABC test to these claims would be appropriate." 

Legislative Negotiations Continue

Last August, there was an attempt by the business community to come up with a legislative solution to some of the difficulties created by this new standard, but that effort fizzled when legislative leadership announced that there would be no discussion of the issue in 2018. However, there is legislation moving forward this year which represents a vehicle for ongoing discussions with the business community concerning Dynamex. Assembly Bill 5 by Assemblymember Lorena Gonzalez (D-San Diego) was introduced early in the year and negotiations over its fate have been continuing for several months.

Recently, AB 5 passed the House after it was amended, indicating that negotiations are advancing, and to the benefit of some industries. Specifically, the bill now provides that the ABC test would not apply to the following (1) a person or organization licensed by the California Department of Insurance; (2) a physicians or surgeon licensed by the State of California; (3) a securities broker-dealer or investment advisor or their agents or representatives registered with the SEC or FINRA or licensed by the State of California; (4) a direct sales salesperson under Unemployment Insurance Code Section 650; (5) real estate licensees; (6) persons providing hairstyling or barbering services that meet certain conditions; and (7) certain specified  "professionals" (law, dentistry, architecture, engineering, accounting, marketing, and human resources) that meet certain criteria. For these individuals, the analysis of employee or independent contractor status would generally be made under the previous Borello standard.

The business community continues to push for further amendments to the bill that would afford further Dynamex relief to business in a comprehensive manner, not just through industry-specific carve-outs. These include: (1) a broader exemption that would apply to many other professionals; (2) a broader exemption for individuals that prefer to make their own schedules with regard to the days and hours they work and make their own decisions regarding to whom they perform services; (3) an exemption for business to business contracts; and (4) preservation of the ability to subcontract for short-term projects and unexpected, immediate demands for additional help.

Negotiations over AB 5 continue in the hopes that it will provide some relief to the employer community, and we are likely to see revisions of some sort before the state Senate votes on the measure. We will continue to monitor further developments and provide updates on this bill, so make sure you are subscribed to  Fisher Phillips' alert system to gather the most up-to-date information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions