Mcle Self-study: the New Abc's of California Employment Law

• Publication year: 2021
• Author: By Shannon Liss-Riordan and Anastasia Doherty

MCLE Self-Study: THE NEW ABC'S OF CALIFORNIA EMPLOYMENT LAW

By Shannon Liss-Riordan and Anastasia Doherty

Shannon Liss-Riordan has brought and won groundbreaking lawsuits that have shaped the law protecting workers in multiple industries, such as Dynamex Ops. W. v. Superior Court and Vazquez v. Jan-Pro Franchising Int'l, Inc. She is currently representing workers in a number of cases against "gig economy" companies that save on labor costs by misclassifying employees as independent contractors. She represents employees nationally, at the trial court and appellate levels. A graduate of Harvard Law School and Harvard College, Ms. Liss-Riordan co-founded Lichten & Liss-Riordan, P.C. Anastasia Doherty is an associate at Lichten & Liss-Riordan. A dedicated workers' rights advocate, who proudly represents workers asserting wage-and-hour and individual discrimination claims against their employers, she is currently involved in a number of cases in which employees have been misclassified as independent contractors, such as Uber and Lyft. Ms. Doherty attended Georgetown University, where she studied English and Justice & Peace, and went on to attend Northeastern University School of Law. The authors can be contacted at (617) 9945800, info@llrlaw.com.

INTRODUCTION

THE "ABC" TEST COMES TO CALIFORNIA

In April of 2018, the California Supreme Court issued the unanimous, 82-page landmark opinion, Dynamex Operations West, Inc. v. Superior Court,¹ announcing the adoption of the ABC test to distinguish employees from independent contractors. The Court explained that the Massachusetts version of the ABC test² best forwarded the remedial purpose of California law. Unlike multi-factor employment tests, including the test that had previously been used under S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations,³ the three-pronged, conjunctive version of the Massachusetts ABC test is less easily manipulated and increases predictability.⁴ The Dynamex Court explained that multi-factor tests create uncertainty for hiring businesses and workers regarding whether a worker has been correctly classified and leave open a loophole in employment protections, because hiring businesses may more easily manipulate workers' circumstances with an eye towards passing the multi-factor test.

Employers have scrambled to cabin the impact of the Dynamex decision.

In contrast, the ABC test places the burden on the alleged employer to meet all three prongs in order to justify classifying a worker as an independent contractor. This includes the strict version of prong B adopted in Massachusetts, which requires the alleged employer to demonstrate that the worker performs work that is outside the usual course of the hiring entity's business.⁵ Because of the strength of prong B, Massachusetts courts have routinely held that a worker's employment status may be decided as a matter of law on summary judgment⁶ and have regularly certified misclassification cases as class actions.⁷

Employers have scrambled to cabin the impact of the Dynamex decision. First, they argued that it should not be retroactive, an argument that the California Supreme Court rejected in January in Vazquez v. Jan-Pro Franchising International, Inc.⁸ The Court applied the usual rule that judicial decisions clarify what the law is and are given retroactive effect and declined to create an exception based upon arguments that the "change" in the law violated due process concerns.⁹

Employers have also attempted to limit the application of the ABC test, in particular arguing that the test does not apply to claims brought under California Labor Code § 2802, which requires that employees be reimbursed for necessary business expenses. While case law on this question is somewhat mixed,¹⁰ the question is largely moot, as the California legislature later passed Assembly Bill No. 5 (AB 5).¹¹ AB 5 codified Dynamex and statutorily adopted the ABC test for California's Wage Orders, Labor Code, and Unemployment Insurance Code claims, with the exception of specific legislative carve-outs.¹² Now that retroactive application of Dynamex has been confirmed, AB 5 should also apply retroactively, since the Vazquez Court has held that it merely clarifies existing law.¹³

Nonetheless, employers persist in attempting to defeat or limit the application of the ABC test to California workers. Some emerging legal battles are outlined below.

CAMPAIGNS AGAINST THE ABC TEST

PROPOSITION 22 AND OTHER LEGISLATIVE INITIATIVES

A number of "gig economy" companies, including Uber, Lyft, DoorDash, Postmates, and Instacart, who were unsuccessful at obtaining a legislature carve-out for their workers, bypassed the legislature and judiciary by taking the issue directly to California voters with Proposition 22 (Prop 22).¹⁴ The ballot measure was the most expensive in California history (costing proponents over $200 million). The bill's sponsors also spammed app-users with push-notifications, cautioning customers that reclassifying gig workers as employees would cause prices to sky rocket and deprive drivers of all flexibility (a myth that several courts have rejected).¹⁵ Prop 22 declares certain "app-based" drivers to be independent contractors, so long as certain specific wage and hour protections are provided for the drivers.¹⁶ Notably, companies will be unable to take refuge in the law if they do not provide these protections.¹⁷

Uber has argued that Prop 22 applies retroactively and thus moots pending misclas-sification claims. In James v. Uber Technologies, Inc., the court rejected this argument and certified a class of all Uber drivers in California who opted out of arbitration; the court held that Prop 22 may simply serve to cut off the class liability period as of its effective date, December 16, 2020.¹⁸ The court noted that statutes are presumptively limited to prospective-only application, absent a clear intent to apply retroactively.¹⁹ Proposition 22 contains no express retroac-tivity provision.²⁰

Worker advocates are now on guard that gig companies will try to replicate Prop 22 in other areas of the country, to assure independent contractor status for their workers under state law. Similar efforts have begun in Massachusetts, New York, New Jersey, Illinois, and Colorado.²¹ In Massachusetts, where the current version of the ABC test has been the law of the land since 2004, a "Proposition 22 clone" was recently introduced, sparking driver protests.²²

Two strategies are needed to counteract these Prop 22 cloning efforts: first, advocating for the adoption of the ABC test as the federal standard for determining employee status²³; and, second, beating bills back in the state legislatures that threaten to undermine employee protections by carving out a new quasi-employee category that strips workers of the protections they are currently entitled to under state law.

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