Opinion ID: 6335029
Heading Depth: 4
Heading Rank: 1

Heading: Applicable Test for Employment Relationship

Text: The parties have directed us to two tests for an employment relationship under California law. The first is the common law test, which is derived from S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399 (Cal. 1989). Under the common law, “[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Id. at 404 (quoting Tieberg v. Unemployment Ins. App. Bd., 471 P.2d 975, 977 (Cal. 1970)) (alteration in original). While the right to control is the most important factor, it is not the only one. Id. Rather, Borello instructs courts to consider the following “secondary indicia” to determine “the nature of a service relationship:”
engaged in a distinct occupation or business;
whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services 14 HILL V. WALMART are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer- employee. Id. (citing, inter alia, Restatement (Second) of Agency § 220). The importance due to each individual factor is casespecific. See, e.g., Germann v. Workers’ Comp. Appeals Bd., 123 Cal. App. 3d 776, 783 (1981). The second test for employment originated with the California Industrial Welfare Commission (IWC), which “is the state agency empowered to formulate regulations (known as wage orders) governing employment in the State of California.” Tidewater Marine W., Inc. v. Bradshaw, 14 Cal. 4th 557, 561 (1996). The principal California Supreme Court opinions explaining this test are Martinez v. Combs, 231 P.3d 259 (Cal. 2010), and Dynamex Operations West, Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018). Martinez held that “[t]o employ . . . under the IWC’s definition, has three alternative definitions. It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” 231 P.3d at 278. The first definition is relatively self-explanatory, and the third definition directly incorporates the common-law test, see Salazar v. McDonald’s Corp., 944 F.3d 1024, 1032 (9th Cir. 2019). As for the second definition, Dynamex held that courts should apply the “ABC test” to determine whether the “suffer or permit to work” standard has been met. 416 P.3d HILL V. WALMART 15 at 40. That test presumes the existence of an employeremployee relationship “[u]nless the hiring entity establishes” all three of the following: (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, (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[.] Id. Although Dynamex was decided after the events giving rise to this case, the California Supreme Court has held that it applies retroactively. Vazquez v. Jan-Pro Franchising Int’l, Inc., 478 P.3d 1207, 1209 (Cal. 2021). 2 Despite Hill’s arguments to the contrary, we conclude that only the Borello test is relevant to our analysis. Martinez and 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). Both cases make clear that they only apply to cases governed by IWC wage orders. See Dynamex, 416 P.3d at 35–36; Martinez, 231 P.3d at 269. Along these lines, the California Court of Appeal has recently held that for “Labor 2 Additionally, in September 2019, the California legislature codified the ABC test via Assembly Bill 5. However, neither party contends that this legislation applies retroactively here. 16 HILL V. WALMART Code claims that are not either rooted in one or more wage orders, or predicated on conduct alleged to have violated a wage order, the Borello test remains appropriate.” Gonzales v. San Gabriel Transit, Inc. 40 Cal. App. 5th 1131, 1157 (2019), review dismissed, 481 P.3d 1144 (Cal. 2021); see also Garcia v. Border Transp. Grp., LLC, 28 Cal. App. 5th 558, 571 (2018) (“There is no reason to apply the ABC test categorically to every working relationship, particularly when Borello appears to remain the standard for worker’s compensation . . . . Borello furnishes the proper standard as to [the plaintiff’s] non-wage-order claims.”); 3 Parada v. E. Coast Transp. Inc., 62 Cal. App. 5th 692, 699 n.2 (2021) (citing Gonzalez and Garcia). Hill did not allege that Walmart violated any wage order, and she does not cite to any case contradicting the Court of Appeal decisions cited above or otherwise applying the IWC test outside the wage-order context. But even if the IWC test did somehow apply, Walmart would still be entitled to raise a good-faith defense because it would have been reasonable for Walmart to conclude that only the Borello test governed its relationship with Hill in light of the language in Martinez and Dynamex suggesting their scope is limited to wage-order cases. See Amaral, 163 Cal. App. 4th at 1202 (reasonable mistake of law sufficient for good-faith defense). Consequently, we need only discuss whether Walmart would have had good reason to believe that Hill was an independent contractor under the Borello test. 3 In Garcia, “both parties agree[d] Dyanamex applie[d],” but the Court of Appeal applied Borello anyway because neither party “identifie[d] a basis to use the ABC test in evaluating non-wage-order claims.” 28 Cal. App. 5th at 571. However, seemingly due to inadequate argument from the parties, Garcia confined this holding to its particular facts. See id. at 571 & n.11. HILL V. WALMART 17