Independent contractor misclassification in California now riskier


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the trial court applied the definitions of “employ” and “employee” in Wage Order No. 9, the Industrial Welfare Commission wage order applicable to the drivers. That wage order, like most, defines “employ” as “to engage, suffer, or permit to work.” It further defines “employer” as any person “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”

Based on those definitions, the trial court concluded that common proof applicable to the class as a whole could be used to determine whether the drivers were properly classified as independent contractors or whether they should have been classified as employees.

On appeal, Dynamex argued that the wage order’s definitions did not apply and the proper test for determining independent contractor or employee status is the multifactor test set forth in 1989 by the California Supreme Court in S.G. Borello & Sons v. Department of Industrial Relations.

The Borello test does not prescribe a bright line (clear-cut rule) for distinguishing between an employee and an independent contractor. Rather, it sets forth several factors that courts must consider to determine, on balance, whether a worker qualifies as an independent contractor. The most important factor involves the degree of the employer’s control over the details of the work.

Secondary factors include, among other things, the duration of the work arrangement, where the work is performed, whether the work is part of the employer’s usual business activities or is specialized, whether the employer or the worker supplies the tools necessary to perform the work, whether the worker also provides services to others, whether the worker can hire other staff, and whether the worker or the employer pays for business expenses.

The Borello test lends itself more to individualized factual inquiries (which often precludes class certification), while the wage order test is more of a bright-line approach (which tends to support class certification).

Rather than agreeing entirely with either Dynamex or the trial court, the appellate court held that both were partially right. According to the appellate court, the applicable test for independent contractor or employee status depends on whether the worker is alleging violations of a wage order or violations falling outside the scope of the wage order. In the former instance, the wage order definitions of “employ” and “employer” apply, while in the latter instance, the multifactor Borello test applies.

In this case, the drivers alleged a failure to pay overtime, which is a violation of the wage order (as well as the Labor Code). Because the wage order specifically requires payment of overtime in certain circumstances, the court held that the test for independent contractor or employee status on that claim is governed by the wage order definitions and could be determined on a classwide basis.

In addition to their overtime claim, the drivers alleged a claim for failure to reimburse business expenses. However, it was unclear which types of expenses were at issue. Because the wage order expressly delineates certain types of expenses that must be paid by an employer (e.g., tools and uniforms), the court held that to the extent the expense reimbursement claim was based on those types of expenses, the wage order definitions apply to determine whether the drivers were employees or independent contractors.

To the extent the drivers sought reimbursement of expenses not specifically mentioned in the wage order, the wage order definitions do not apply, and the trial court will have to reassess, using the Borello test, whether class certification is appropriate for those claims….

Read the full story at “Independent contractor misclassification in California now riskier.

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