Why the Dynamex Decision Is Important for Injured Workers Regardless of Whether the "abc" Test Applies to Workers' Compensation

• Publication year: 2019
• Author: Aaron Kaufmann, Esq.

Why the Dynamex Decision Is Important for Injured Workers Regardless of Whether the "ABC" Test Applies to Workers' Compensation

Aaron Kaufmann, Esq.

Giselle Olmedo, Esq.

Oakland, California

Employers have long misclassified workers as independent contractors to shirk a myriad of employer responsibilities for workplace protections. A hiring entity that can show a worker does not fall within the statutory definitions of employee can avoid complying with wage and hour laws (overtime, meal and rest period, and minimum wage, among others), pass on to the worker ordinary business expenses, and, perhaps worst of all, skip providing workers' compensation insurance. This problem has received increasing attention in the last several years, as high-profile companies like Uber, GrubHub, Amazon, and FedEx have relied on the independent contractor model to provide services to its customers.

Last year's California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 made it significantly more difficult for employers to hide behind the independent contractor label as a means to avoid employee-protective laws. The streamlined "ABC" test announced in Dynamex should result in more workers qualifying as employees covered by the protections of the California Industrial Welfare Commission (IWC) wage orders. Many advocates for injured workers are disappointed that the ABC test likely does not supplant the multi-factored Borello test used to determine employment for California's workers' compensation requirements, established in the landmark decision S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. Nonetheless, in restating key principles from Borello and rebranding its employment status test as the "statutory purpose" test, Dynamex offers valuable guidance to advocates arguing for workers' compensation coverage for injured workers.

This article discusses the import of Dynamex for workers' compensation coverage regardless of whether the Legislature or courts extend the ABC test to workers' compensation.

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Two Important Parts of Dynamex

The ABC Test

In Dynamex, the California Supreme Court established the ABC test for employment status for all claims concerning employer obligations under the IWC wage orders. Dynamex, supra, 4 Cal.5th at p. 957. Such obligations

relate...to the minimum wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.

Id. at pp. 913-14.

To lawfully classify a worker as an independent contractor not covered by the wage orders, the hiring entity must prove each of the three parts of the ABC test:

• 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
• That the worker performs work that is outside the usual course of the hiring entity's business; and
• That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Id. at p. 964. The test is conjunctive, so failure to establish any prong of the test results in a finding that the worker is an employee. Id.

Rebranding Borello as the "Statutory Purpose" Test

Although the California Supreme Court did not extend the ABC test to workers' compensation or non-wage order claims in Dynamex, it restated and clarified key principles animating the multi-factored Borello test. The Court rebranded Borello as the "statutory purpose" test, emphasizing the multiple factors that must be applied

to determine which classification (employee or independent contractor) best effectuates the underlying legislative intent and objective of the statutory scheme at issue.

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