The attorneys of The Arns Law Firm pride themselves on their knowledge of the law, and their commitment to their clients. As part of their practice, the attorneys keep constantly informed as to the changing state of the law. Additionally, the attorneys frequently give lectures as well as write articles concerning the state of the law.
Dynamex Could Mean a Win for Workers
By: Kevin M. Osborne
Imagine owning a business in a competitive market. You are looking for any possible advantage. If there were a way to immediately cut overhead by as much as 40% without reducing your productivity, you would likely do it without question. (1.)
Now imagine working as an operations-level employee for a single employer for years. One day you go to work to find all employee benefits are gone. You are no longer guaranteed minimum wage, overtime, or workers’ compensation insurance coverage for on-the-job injuries. You would be in the same situation as the plaintiffs and 1,800 other delivery drivers in Dynamex Operations West, Inc. v. Super Court, who found themselves reclassified as independent contractors with the stroke of their employer’s pen in 2004. (2.)
Classifying a worker as an independent contractor is not illegal per se. But classifying a worker who is rightfully an employee as an independent contractor to avoid the costs and responsibilities of the employment relationship, or an “independent contractor subterfuge,” violates worker’s rights under the Labor Code.
What is the test for determining whether an employer is misclassifying a worker? This was a settled question for much of the last 30 years. The California Supreme Court may change the answer to this question when it announces its holding in Dynamex.
Three Possible Outcomes
The Court will rule in one of three ways: employee status will be determined under either the 2-tier test from the 1989 case S.G. Borello & Sons, Inc. v. Department of Industrial Relations (3) which first considers the general question of control then considers a non-exhaustive list of eight other factors; or the 3-pronged test from the 2010 case Martinez v. Combs (4) which considers three alternative definitions of “employee”; or an entirely new test, likely combining elements of both Borello and Martinez.
The Borello 2-Tier Independent Contractor Test
The most influential California Supreme Court case on this question for the last three decades has been Borello. There are two components to this test – a “primary test” and a series of “secondary considerations.” The primary test is whether the alleged employer has the right to control the manner and means of accomplishing the desired result. The secondary considerations mentioned in the Borello opinion, which were explicitly not exhaustive, include eight inquiries:
- Whether the one performing services is engaged in a distinct occupation or business
- The kind of occupation and whether the work is usually done under another’s direction or without supervision;
- The skill required in the particular occupation;
- Whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
- The length of time for which the services are to be performed;
- The method of payment, whether by the time or by the job;
- Whether the work is a part of the regular business of the principal; and
- Whether the parties believe they are creating an employer-employee relationship
Since 1989, this 2-tier test has been the primary inquiry in California used to analyze whether a worker is an independent contractor or an employee.
The Martinez v. Combs 3-Alternative Joint Employment Test
In 2010, the California Supreme Court created a corollary to Borello. The case of Martinez v. Combs was not about independent contractor misclassification; it was about the different but related issue of “joint employment.” The joint employment situation often arises when one company, a “hirer” outsources its labor needs to another company, a “contractor.” The opinion analyzed the facts under the statutory framework of the Industrial Welfare Commission’s Wage Orders and ruled there are three alternative definitions of an “employer”:
- Control over wages, hours, or working conditions.
- Knowledge of the violation and failed to prevent it.
- Creating a common law employment relationship.
The California Supreme Court is now deliberating on this question: can independent contractor misclassification be analyzed under the Martinez test instead of the Borello test?
Key Difference Between Borello and Martinez
The factors analyzed in the Martinez test and those of the Borello test overlap, but there are some important differences. To begin with, Borello considers the subjective belief of the parties regarding their relationship. Martinez ignores what the parties believe and relies exclusively on a set of limited factual and circumstantial tests. Also missing from the Martinez test are the secondary considerations of the Borello test that give repeated consideration to the nature of the occupation in question.
The 3-alternative test in Martinez also includes a number of factors absent from the Borello test. For example, Borello gives no express weight to control over work hours or wages (the method of payment and the length of engagement are both considered, but control over wages or hours is unmentioned). A hirer of a worker misclassified as an independent contractor is likely to have total control over the worker’s pay rate and hours. In the joint employment context, however, there is an intermediary company (and sometimes multiple intermediary companies) between the hirer and the worker. Thus, a court analyzing a plaintiff worker’s status under Martinez is more likely to find employee status than a court analyzing the same case under Borello, where these points are not necessarily analyzed.
Regardless of the outcome, attorneys in the employment field should keep close tabs on Dynamex as it will likely shape the employment status landscape for years to come.
1. Bulut, Koray, “How Uber And Other On-Demand Startups Can Protect Themselves From Worker Lawsuits” Forbes (Sept. 28, 2015).
2. Dynamex Operations West, Inc. v. Super Ct., Case No. S222732 (reviewing Dynamex Operations West, Inc. v. Super Ct. (2014) Cal.App.4th 718).
3. S.G. Borello & Sons, Inc. v. Dep’t of Indus. Rels. (1989) 48 Cal.3d 341.
4. Martinez v. Combs (2010) 49 Cal.4th 35.
New California Law Eliminates Discriminatory Damage Awards: Rodriguez v. Kline is No More
By: Jonathan E. Davis
In 2013, it was estimated that over 2.6 million unauthorized or undocumented (1) immigrants lived in California, making up 10% of the state’s workforce. (2.) Undocumented immigrants contribute an estimated $130 billion to California’s GDP, an amount that is greater than the entire GDP of Nevada. (3.) Those workers pay taxes, buy homes, shop, drive, and participate in virtually all aspects of our economic, civic and cultural life. The Social Security Administration estimates that nearly $12 billion are paid into the Social Security system every year by unauthorized workers who will never receive any in benefits. (4.)
40% of Californians are immigrants, authorized and unauthorized; nearly 75% live with at least one U.S. citizen. (5.) This population is also relatively stable, with 50% of unauthorized immigrants residing in the U.S. for more than 12.7 years. (6.) It is against this demographic and economic backdrop that for the last thirty years the California civil justice system sanctioned discrimination against unauthorized workers who suffered injuries caused by the negligence of others.
When a person is injured and cannot work, they suffer past and/or future wage loss and have the right to make a claim for compensatory damages in an amount equal to the loss. For example, if a union construction worker earning $100,000 a year in wages and benefits can no longer work due to injury, he or she can make a claim equal to their wage loss. Such claims can be worth millions.
Despite all the contributions to our economy and tax base, a California Court of Appeal decided in 1986 in the case of Rodriguez v. Kline that, with very limited exceptions, when an undocumented worker is injured, he or she may only make a claim for wage loss based on the currency of their country of origin. (7.) The effect of the Rodriguez decision has been devastating. The exchange rate for the Mexican peso has decreased from 55 pesos per U.S. dollar in 1986 to 18.2 pesos per dollar in 2016. Thus, if an unauthorized worker from Mexico was injured and was earning $100,000 a year, his or her claim would be reduced to approximately $5,000 for each year of wage loss, basically a nickel on the dollar.
The result? Workers and their families who lived, worked, contributed to their community, paid taxes, owned homes and educated their children here in California were faced with an economic calamity if they suffered injury or death. Many workers, given this prospect would forego their wage loss claim or give up on making any type of claim at all. Additionally, many attorneys would balk at taking on meritorious cases given their limited value.
To remedy this injustice, in August Governor Brown signed AB 2159, legislation that amended the evidence code to state:
Evidence Code Section 351.2. In a civil action for personal injury or wrongful death, evidence of a person’s immigration status shall not be admitted into evidence, nor shall discovery into a person’s immigration status be permitted.
Under AB 2159, unauthorized workers can bring claims for all their lost wages and with the knowledge their loss will receive the same treatment under the law as any other worker. Anyone who is injured can make a claim without fear that their immigration status will be part of a public record and or reduce the value of their claim. As a result, no longer is there a two-tier society when a worker is injured or killed on the job. AB 2159 brings justice to millions of workers and their families in California who have richly contributed to our state, our economy and our communities.
1. Unauthorized or undocumented is used interchangeable to describe persons who reside in California without legal status i.e. legal permanent residence or U.S. Citizenship. More often than not, the undocumented residents of California do not have a valid work permit.
2. What's at Stake for the State: Undocumented Californians, Immigration Reform, and Our Future Together, Manuel Pastor and Enrico Marcelli, Vanessa Carter and Jared Sanchez, May 2013, the University of Southern California’s Center for the Study of Immigrant Integration (USC’s CSII) and California Immigrant Policy Center (CIPC).
4. ACTUARIAL NOTE SOCIAL SECURITY ADMINISTRATION Number 151 April 2013 Office of the Chief Actuary Baltimore, Maryland, “EFFECTS OF UNAUTHORIZED IMMIGRATION ON THE ACTUARIAL STATUS OF THE SOCIAL SECURITY TRUST FUNDS” by Stephen Goss, Alice Wade, J. Patrick Skirvin, Michael Morris, K. Mark Bye, and Danielle Huston.
5. What's at Stake for the State: Undocumented Californians, Immigration Reform, and Our Future Together, Manuel Pastor and Enrico Marcelli, Vanessa Carter and Jared Sanchez, May 2013, the University of Southern California’s Center for the Study of Immigrant Integration (USC’s CSII) and California Immigrant Policy Center (CIPC).
7. Rodriguez v. Kline (1986) 186 Cal. App. 3d 1146
Articles By Your Attorneys
The following are article written by attorneys at the firm on recent topics involving the law.