The California Supreme Court issued a precedent-setting decision in the Dynamex case (Dynamex Operations West, Inc. v. Sup. Court of Los Angeles, Charles Lee, et al, Real Parties in Interest, S222732, (Sup. Ct BC332016)), expanding the scope of the employment relationship between California businesses and those individuals performing work at any business in the State of California.
In 2004, Dynamex imposed a change of classification upon its employee drivers, converting them to independent contractors. In doing so, Dynamex likely committed class-wide violations of California’s wage and hour laws.
On April 31, 2018, a unanimous California Supreme Court affirmed the decisions of the trial court and appellate court to certify this case as a class action. In doing so, the Court nearly eliminated the use of any “independent contractor” classification by employers in California, by applying the ABC test:
The ABC TEST: “…[A] worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for performance of the work and in fact; (B) that the worker performs work that it 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 of the same nature as the work performed for the hiring entity…” Dynamex, supra.
Dynamex is a major delivery service that delivers supplies to stores such as Home Depot and Lowes. By converting its drivers from employees to independent contractors, it engaged in class-wide misclassification of its workers. These same drivers are now suing Dynamex West in California for wage and hour violations under Wage Order 9, which covers the transportation and logistics industries.
Dynamex is now exposed to class claims for lost wages, unpaid, meal period – rest period premium wages, penalties, attorneys fees and costs. It is difficult for many employers to survive the resulting payout that occurs in these cases.
To safeguard your business, you should assume your workers are all employees. If you are misclassifying your workers as independent contractors, especially in the transportation – logistics industry, you need to re-evaluate your approach, in light of the Dynamex decision.
CE Smith Law Firm can help your Company transition from “independent contractors” to workers that are properly classified as employees, to limit your exposure to class action litigation, as well as state and federal investigations arising from your Company’s failure to withhold taxes and related deductions from your “independent contractors,” who are actually employees. Given this precedent-setting decision, it is critical that you act now. My Law Firm remains ready to assist you with the transition.