Dynamex Operations West, Inc. v. Superior Court: Employees' Perspective

• Publication year: 2018
• Author: By Cornelia Dai

Dynamex Operations West, Inc. v. Superior Court: Employees' Perspective

By Cornelia Dai

Cornelia Dai is a partner at Hadsell Stormer & Renick, LLP, a private plaintiff-side law firm in Southern California. She specializes in employment, wage and hour, and civil rights law, with a focus on class actions and complex litigation.

The California Supreme Court's unanimous 82-page decision in Dynamex Operations West, Inc. v. Superior Court¹ resoundingly answered the call for protection of employees in a time of rampant independent contractor misclassification fueled by a changing economy. Dynamex clarifies that the broad "suffer and permit to work" definition for "employ," found in California's wage orders, is the appropriate standard for determining whether a worker is an employee or an independent contractor.

Adopting the ABC test to determine whether a worker was suffered or permitted to work, Dynamex holds that a worker is presumed to be an employee, and that the hiring entity must satisfy all three conditions of the ABC test to overcome the presumption and establish the worker is an independent contractor. The ABC test should prove to be a more difficult test for hiring companies to meet than the multifactor "right to control" test under S.G. Borello & Sons, Inc. v. Department of Industrial Relations.²

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Dynamex Holds the Broad Suffer or Permit to Work Standard Applies to the Employee/Independent Contractor Determination

In Dynamex, the California Supreme Court addressed whether the definitions of "employ" and "employer" set forth in California wage orders and discussed in the court's prior decision in Martinez v. Combs³ may be relied upon to determine the proper classification of a worker for purposes of the obligations imposed by the wage orders.⁴

Plaintiffs, delivery drivers, filed a class action against Dynamex, a nationwide same-day courier and delivery service, alleging that Dynamex misclassified its drivers as independent contractors, leading to violations of the provisions of Industrial Welfare Commission (IWC)⁵ wage order No. 9, various Labor Code sections, and Business and Professions Code § 17200.⁶ In determining whether to certify the class, the trial court considered the three alternate definitions for "employ" under the wage orders recognized in Martinez: (a) to exercise control over the hours, wages, or workings conditions; (b) to suffer or permit to work; or (c) to engage, thereby creating a common law employment relationship. The court recognized the third definition, the common law employment relationship standard, as the multifactor Borello test.⁷ Relying on these definitions, the court found that common issues relating to proper classification of the drivers predominated over potential individual issues and granted class certification.⁸ The defendant sought review, arguing that the first and second definitions as construed by Martinez were limited to the context of joint employment and that only the multifactor Borello test applied to the threshold question of whether the worker is an employee or independent contractor. The court of appeal rejected these arguments, finding that each of the three alternate standards in Martinez may apply for determining employee status under the wage orders.⁹

The California Supreme Court affirmed the judgment of the court of appeal, holding that the trial court had not erred in certifying a class action in reliance on the three alternate definitions for "employ" recognized in Martinez, and specifically the suffer or permit to work definition.¹⁰,¹¹

The Court Adopts the ABC Test to Provide Clarity and Consistency and Less Opportunity for Manipulation

The California Supreme Court adopted the commonly referred to ABC test, utilized by a number of jurisdictions, to determine whether a worker is an employee or independent contractor under the suffer or permit to work definition.¹² The standard presumes a worker is an employee and places the burden on the hiring entity to establish that the worker is an independent contractor. The test requires the hiring entity, in order to meet this burden, to establish each of the following three factors: "(A) 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; and (B) that the worker performs work that is outside the usual course of the hiring entity's business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed."¹³

The court, after evaluating the inherent disadvantages of the multifactor Borello test, reasoned that the ABC test was "faithful to its history and to the fundamental purpose of the wage orders and will provide greater clarity and consistency, and less opportunity for manipulation, than a test or standard that invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis."¹⁴

The court applied the ABC factors to the facts in Dynamex and...