Opinion ID: 6497769
Heading Depth: 3
Heading Rank: 2

Heading: The Proper Employment Test

Text: “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.” Cal. Trucking Ass’n v. Su, 903 F.3d 953, 959 n.4 (9th Cir. 2018). Rather, Dynamex was clear that it “address[ed] only” the issue of how to distinguish between employees and independent contractors “with regard to those claims that derive directly from the obligations imposed by [a] wage order.” 416 P.3d at 25. Dynamex further suggested that its holding should not extend beyond that context, by describing the ABC test as a “distinct standard that provides broader coverage of workers with regard to the very fundamental protections afforded by 8 In addition to Rule 23(b)(3)’s predominance requirement, Rule 23(b)(3)’s superiority requirement further requires “that a class action [be] superior to other available methods for fairly and efficiently adjudicating the controversy.” FAS argues that a class action is not superior to other methods of resolving this case because the class members have interests in individually controlling their claims, see Fed. R. Civ. P. 23(b)(3)(A), given that they “stand to recover five- and even six-figure awards.” Although the Supreme Court has explained that “the text of Rule 23(b)(3) does not exclude from certification cases in which individual damages run high,” it has also explained that “the Advisory Committee [for Rule 23(b)(3)] had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (internal quotation marks omitted). Thus, even though the large damages awards the class members stand to gain are not sufficient on their own to overcome Rule 23(b)(3) certification, they support doing so. 24 BOWERMAN V. FIELD ASSET SERVICES wage and hour laws and wage orders,” given “the [Industrial Welfare Commission’s] determination that it is appropriate to apply a distinct and particularly expansive definition of employment regarding obligations imposed by a wage order.” 9 Id. at 29 (emphases added). The California Supreme Court’s subsequent decision in Vazquez v. Jan-Pro Franchising International, Inc., 478 P.3d 1207, affirmed that “[i]n Dynamex, [the] court was faced with a question of first impression: What standard applies under California law in determining whether workers should be classified as employees or independent contractors for purposes of the obligations imposed by California’s wage orders?” Id. at 1208 (emphasis added). It also held that Dynamex “did not change a settled rule” like the Borello 9 The California Supreme Court elaborated that its holding “[found] its justification in the fundamental purposes and necessity of the minimum wage and maximum hour legislation in which the standard has traditionally been embodied”: Wage and hour statutes and wage orders were adopted in recognition of the fact that individual workers generally possess less bargaining power than a hiring business and that workers’ fundamental need to earn income for their families’ survival may lead them to accept work for substandard wages or working conditions. The basic objective of wage and hour legislation and wage orders is to ensure that such workers are provided at least the minimal wages and working conditions that are necessary to enable them to obtain a subsistence standard of living and to protect the workers’ health and welfare. These critically important objectives support a very broad definition of the workers who fall within the reach of the wage orders. Dynamex, 416 P.3d at 31–32 (citations omitted). BOWERMAN V. FIELD ASSET SERVICES 25 test, as applied outside the wage order context. Id. at 1209. Consistent with that guidance, the California Court of Appeal has repeatedly limited Dynamex’s application to claims based on or “rooted in” California’s wage orders. 10 See Vendor Surveillance Corp. v. Henning, 276 Cal. Rptr. 3d 458, 468–69 (Ct. App. 2021); Gonzales v. San Gabriel Transit, Inc., 253 Cal. Rptr. 3d 681, 701–04 (Ct. App. 2019); Garcia v. Border Transp. Grp., LLC, 239 Cal. Rptr. 3d 360, 370–71 (Ct. App. 2018). Here, the class members’ expense reimbursement claims are not based on a California wage order, but on California Labor Code § 2802. 11 Nor are they “rooted in” a California wage order, even though the class members belatedly invoked Wage Order 16-2001 in their class certification briefing. Wage Order 16-2001 does not “cover[] most of the [section 2802] violations alleged,” and its provisions are not “equivalent or overlapping” with section 2802. Gonzales, 253 Cal. Rptr. 3d at 702, 704. Although section 2802 covers “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or 10 In the absence of controlling authority by the California Supreme Court, “we follow decisions of the California Court of Appeal unless there is convincing evidence that the California Supreme Court would hold otherwise.” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 889 (9th Cir. 2010). 11 Assembly Bill 5 codified “the ABC test and expanded its reach to apply to all claims under the Labor Code and the Unemployment Insurance Code.” People v. Superior Court, 271 Cal. Rptr. 3d 570, 574 (Ct. App. 2020); see also Cal. Lab. Code § 2775(b)(1). The ABC test’s extension “was prospective, with an effective date of January 1, 2020.” Lawson v. Grubhub, Inc., 13 F.4th 908, 912 (9th Cir. 2021) (citing Cal. Lab. Code § 2785(c)). Because the claims at issue in this case arise from conduct that occurred before January 1, 2020, AB 5 does not decide the test applicable to the expense reimbursement claims. 26 BOWERMAN V. FIELD ASSET SERVICES her duties,” Cal. Lab. Code § 2802(a), Wage Order 16-2001 covers only “tools or equipment,” Cal. Code Regs. tit. 8, § 11160. Indeed, many expenses for which class members sought and recovered reimbursement at trial, including insurance, cellphone charges, dump fees, and mileage/fuel, are covered only by section 2802—not by Wage Order 162001’s “tools and equipment” provision. Thus, Borello, not Dynamex, applies to the expense reimbursement claims.
Neither party disputes that the class members’ overtime claims are based on California’s wage orders. Still, FAS insists that Borello governs, because FAS believes the overtime claims are “joint employment” claims to which Dynamex does not apply. FAS is correct that Dynamex does not apply to joint employment claims. The California Supreme Court created Dynamex’s ABC test to address “concerns . . . regarding the disadvantages . . . inherent in relying upon a multifactor, all the circumstances standard for distinguishing between employees and independent contractors.” 416 P.3d at 35. Those concerns include (1) “that a multifactor, ‘all the circumstances’ standard makes it difficult for both hiring businesses and workers to determine in advance how a particular category of workers will be classified, frequently leaving the ultimate employee or independent contractor determination to a subsequent and often considerably delayed judicial decision”; and (2) that it “affords a hiring business greater opportunity to evade its fundamental responsibilities under a wage and hour law by dividing its workforce into disparate categories and varying the working conditions of individual workers within such categories with an eye to the many circumstances that may be relevant.” Id. at 33–34. BOWERMAN V. FIELD ASSET SERVICES 27 Because these “reasons for selecting the ‘ABC’ test are uniquely relevant to the issue of allegedly misclassified independent contractors,” the ABC test does not extend to the joint employment context, where those concerns are no longer present. Curry v. Equilon Enters., LLC, 233 Cal. Rptr. 3d 295, 313–14 (Ct. App. 2018). Indeed, “[i]n the joint employment context, the alleged employee is already considered an employee of the primary employer,” who “is presumably paying taxes.” Id. at 313. Furthermore, “the employee is afforded legal protections due to being an employee of the primary employer.” Id. As a result, the policy purpose behind Dynamex’s ABC test, i.e., “the policy purpose for presuming the worker to be an employee and requiring the secondary employer to disprove the worker’s status as an employee[,] is unnecessary” in joint employment cases, “in that taxes are being paid and the worker has employment protections.” Id. at 313–14; see also Henderson v. Equilon Enters., LLC, 253 Cal. Rptr. 3d 738, 753–54 (Ct. App. 2019) (holding that the ABC test also does not apply to joint employment claims because “parts B and C of the ABC test do not fit analytically with such claims,” id. at 753). But Bowerman’s claims (and those of other sole proprietors) are not joint employment claims—they are employee misclassification claims, like those in Dynamex. FAS argues that the class members are “employees of their [own] self-owned businesses.” Dynamex’s policy concerns are equally applicable for sole proprietors like Bowerman because they have no putative employer other than FAS to pay their taxes or afford them legal protections under the California wage orders. See Ball v. Steadfast-BLK, 126 Cal. Rptr. 3d 743, 747 (Ct. App. 2011) (“[A] sole proprietorship is not a legal entity separate from its individual owner.”). So Dynamex applies to Bowerman’s overtime claims. 28 BOWERMAN V. FIELD ASSET SERVICES But FAS’s joint employment argument would likely succeed were an actual employee of a vendor suing FAS, claiming that FAS was an employer. Notably, PlaintiffsAppellees’ counsel conceded at oral argument that at least some of the class members are employed by entities other than FAS. 12 Thus, some of the class members’ theories of liability could depend on their ability to establish that FAS was a joint employer. On remand, the district court may consider the joint employment issue in the first instance for class members who own or operate LLCs or corporations, which are distinct legal entities. 13 See Nw. Energetic Servs., LLC v. Cal. Franchise Tax Bd., 71 Cal. Rptr. 3d 642, 649 (Ct. App. 2008) (LLCs); Merco Constr. Eng’rs, Inc. v. Municipal Court, 581 P.2d 636, 639 (Cal. 1978) (corporations).