Under both California and federal law, the question whether an individual worker should properly be classified as an employee or, instead, as an independent contractor has considerable significance for workers, businesses, and the public generally. On the one hand, if a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. The worker then obtains the protection of the applicable labor laws and regulations. On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits, and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.
Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees. In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled.
The issue in this case relates to the resolution of the employee or independent contractor question in one specific context. Here we must decide what standard applies, under California law, in determining whether workers should be classified as employees or as independent contractors for purposes of California wage orders, which impose obligations relating 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.
In the underlying lawsuit in this matter, two individual delivery drivers, suing on their own behalf and on behalf of a class of allegedly similarly situated drivers, filed a complaint against Dynamex Operations West, Inc. (Dynamex), a nationwide package and document delivery company, alleging that Dynamex had misclassified its delivery drivers as independent contractors rather than employees. The drivers claimed that Dynamex’s alleged misclassification of its drivers as independent contractors led to Dynamex’s violation of the provisions of Industrial Welfare Commission wage order No. 9, the applicable state wage order governing the transportation industry, as well as various sections of the Labor Code, and, as a result, that Dynamex had engaged in unfair and unlawful business practices under Business and Professions Code section 17200.
Prior to 2004, Dynamex classified as employees drivers who allegedly performed similar pickup and delivery work as the current drivers perform. In 2004, however, Dynamex adopted a new policy and contractual arrangement under which all drivers are considered independent contractors rather than employees. Dynamex maintains that, in light of the current contractual arrangement, the drivers are properly classified as independent contractors.
After an earlier round of litigation in which the trial court’s initial order denying class certification was reversed by the Court of Appeal (Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325), the trial court ultimately certified a class action embodying a class of Dynamex drivers who, during a pay period, did not themselves employ other drivers and did not do delivery work for other delivery businesses or for the drivers’ own personal customers. In finding that the relevant common legal and factual issues relating to the proper classification of the drivers as employees or as independent contractors predominated over potential individual issues, the trial court’s certification order relied upon the three alternative definitions of “employ” and “employer” set forth in the applicable wage order as discussed in this court’s then-recently decided opinion in Martinez v. Combs (2010) 49 Cal.4th 35, 64 (Martinez). As described more fully below, Martinez held that “[t]o employ . . . under the [wage order], 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.” (49 Cal.4th at p. 64.) The trial court rejected Dynamex’s contention that in the wage order context, as in most other contexts, the multifactor standard set forth in this court’s seminal decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello) is the only appropriate standard under California law for distinguishing employees and independent contractors.
In response to the trial court’s denial of Dynamex’s subsequent motion to decertify the class, Dynamex filed the current writ proceeding in the Court of Appeal, maintaining that two of the alternative wage order definitions of “employ” relied upon by the trial court do not apply to the employee or independent contractor issue. Dynamex contended, instead, that those wage order definitions are relevant only to the distinct joint employer question that was directly presented in this court’s decision in Martinez — namely whether, when a worker is an admitted employee of a primary employer, another business or entity that has some relationship with the primary employer should properly be considered a joint employer of the worker and therefore also responsible, along with the primary employer, for the obligations imposed by the wage order.
The Court of Appeal rejected Dynamex’s contention, concluding that neither the provisions of the wage order itself nor this court’s decision in Martinez supported the argument that the wage order’s definitions of “employ” and “employer” are limited to the joint employer context and are not applicable in determining whether a worker is a covered employee, rather than an excluded independent contractor, for purposes of the obligations imposed by the wage order. The Court of Appeal concluded that the wage order definitions discussed in Martinez are applicable to the employee or independent contractor question with respect to obligations arising out of the wage order. The Court of Appeal upheld the trial court’s class certification order with respect to all of plaintiffs’ claims that are based on alleged violations of the wage order.
At the same time, the Court of Appeal concluded that insofar as the causes of action in the complaint seek reimbursement for business expenses such as fuel and tolls that are not governed by the wage order and are obtainable only under section 2802 of the Labor Code, the Borello standard is the applicable standard for determining whether a worker is properly considered an employee or an independent contractor. With respect to plaintiffs’ non-wage-order claim under section 2802, the Court of Appeal remanded the matter to the trial court to reconsider its class certification of that claim pursuant to a proper application of the Borello standard as further explicated in this court’s decision in Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522 (Ayala).
Dynamex filed a petition for review in this court, challenging only the Court of Appeal’s conclusion that the wage order definitions of “employ” and “employer” discussed in Martinez are applicable to the question whether a worker is properly considered an employee or an independent contractor for purposes of the obligations imposed by an applicable wage order. We granted review to consider that issue.
For the reasons discussed below, we agree with the Court of Appeal that the trial court did not err in concluding that the “suffer or permit to work” definition of “employ” contained in the wage order may be relied upon in evaluating whether a worker is an employee or, instead, an independent contractor for purposes of the obligations imposed by the wage order. As explained, in light of its history and purpose, we conclude that the wage order’s suffer or permit to work definition must be interpreted broadly to treat as “employees,” and thereby provide the wage order’s protection to, all workers who would ordinarily be viewed as working in the hiring business. At the same time, we conclude that the suffer or permit to work definition is a term of art that cannot be interpreted literally in a manner that would encompass within the employee category the type of individual workers, like independent plumbers or electricians, who have traditionally been viewed as genuine independent contractors who are working only in their own independent business.
For the reasons explained hereafter, we conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the “ABC” test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) 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 the performance of such 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 of the same nature as the work performed for the hiring entity.
Although, as we shall see, it appears from the class certification order that the trial court may have interpreted the wage order’s suffer or permit to work standard too literally, we conclude that on the facts disclosed by the record, the trial court’s certification order is nonetheless correct as a matter of law under a proper understanding of the suffer or permit to work standard and should be upheld.
Accordingly, we conclude that the judgment of the Court of Appeal should be affirmed.
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Monday, April 30, 2018
Casino Pauma v. NLRB
(9th Cir. 16-70397 4/26/18) NLRA/Commercial Gaming on Tribal Lands
The panel granted the National Labor Relations Board’s petition for enforcement of its order; denied Casino Pauma’s petition for review; and upheld the Board’s conclusions that it may apply the National Labor Relations Act (“NLRA”) to the relationship between employees working in commercial gaming establishments on tribal lands and the tribal governments that own and manage the establishments, and that Casino Pauma committed unfair labor practices in violation of the NLRA by trying to stop union literature distribution.
The panel held that the Board affirmatively waived any preclusion defense before this court, deciding instead to litigate the question of its ability to regulate tribes under the NLRA on the merits.
The panel held that although the NLRA was ambiguous as to its application to tribal employers, the Board’s determination that such employers were covered by the NLRA was a “reasonably defensible” interpretation of the NLRA. The panel also held that, contrary to Casino Pauma’s contentions, application of federal Indian law did not produce a different result in this case. The panel held that there was no conflict between the NLRA and the Indian Gaming Regulatory Act, and concluded that Casino Pauma’s compact with California did not displace the application of the NLRA to its activities.
The panel held that there was no exhaustion bar to consideration of Casino Pauma’s main argument under Republic Aviation Corp. v. NLRB, 324 U.S. 793 (1945), that it did not violate NLRA section 8(a)(1) when it prevented employees from distributing union literature to customers in front of the casino. The panel concluded that the Board properly interpreted Republic Aviation’s holding concerning NLRA section 7 to reach employees’ customer-directed union literature distribution on non-work time in non-work areas of the employer’s property. The panel further held that the Board reasonably applied to Casino Pauma its literature distribution rules concerning casinos. The panel held that the Board’s conclusion that Casino Pauma violated its employees’ NLRA right to distribute union literature was adequately supported, both by the applicable legal principles and the record.
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The panel granted the National Labor Relations Board’s petition for enforcement of its order; denied Casino Pauma’s petition for review; and upheld the Board’s conclusions that it may apply the National Labor Relations Act (“NLRA”) to the relationship between employees working in commercial gaming establishments on tribal lands and the tribal governments that own and manage the establishments, and that Casino Pauma committed unfair labor practices in violation of the NLRA by trying to stop union literature distribution.
The panel held that the Board affirmatively waived any preclusion defense before this court, deciding instead to litigate the question of its ability to regulate tribes under the NLRA on the merits.
The panel held that although the NLRA was ambiguous as to its application to tribal employers, the Board’s determination that such employers were covered by the NLRA was a “reasonably defensible” interpretation of the NLRA. The panel also held that, contrary to Casino Pauma’s contentions, application of federal Indian law did not produce a different result in this case. The panel held that there was no conflict between the NLRA and the Indian Gaming Regulatory Act, and concluded that Casino Pauma’s compact with California did not displace the application of the NLRA to its activities.
The panel held that there was no exhaustion bar to consideration of Casino Pauma’s main argument under Republic Aviation Corp. v. NLRB, 324 U.S. 793 (1945), that it did not violate NLRA section 8(a)(1) when it prevented employees from distributing union literature to customers in front of the casino. The panel concluded that the Board properly interpreted Republic Aviation’s holding concerning NLRA section 7 to reach employees’ customer-directed union literature distribution on non-work time in non-work areas of the employer’s property. The panel further held that the Board reasonably applied to Casino Pauma its literature distribution rules concerning casinos. The panel held that the Board’s conclusion that Casino Pauma violated its employees’ NLRA right to distribute union literature was adequately supported, both by the applicable legal principles and the record.
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Scott v. Gino Morena Enter.
(9th Cir. 16-56200 4/27/18) Title VII Limitations Period/Continuing Violation
The panel affirmed in part and reversed in part the district court’s summary judgment in favor of the defendant on claims under Title VII of the Civil Rights Act of 1964.
The panel held that, under 42 U.S.C. § 2000e-5(f)(1), the 90-day period for filing a civil action, following exhaustion of administrative remedies, begins when the aggrieved person is given notice of the right to sue by the Equal Employment Opportunity Commission, rather than when the person becomes eligible to receive a right-to-sue notice from the EEOC. Accordingly, the plaintiffs’ claims based on her first administrative charge were timely.
The panel held that the plaintiff’s claims based on a second administrative charge were untimely, but she could base her Title VII claims on the defendant’s alleged acts occurring after she filed her first administrative charge to the extent she could show such acts were part of a single hostile work environment claim.
The panel affirmed the district court’s grant of summary judgment only as to claims based on discrete discriminatory or retaliatory acts occurring after the plaintiff filed her first administrative charge. The panel otherwise reversed and remanded.
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The panel affirmed in part and reversed in part the district court’s summary judgment in favor of the defendant on claims under Title VII of the Civil Rights Act of 1964.
The panel held that, under 42 U.S.C. § 2000e-5(f)(1), the 90-day period for filing a civil action, following exhaustion of administrative remedies, begins when the aggrieved person is given notice of the right to sue by the Equal Employment Opportunity Commission, rather than when the person becomes eligible to receive a right-to-sue notice from the EEOC. Accordingly, the plaintiffs’ claims based on her first administrative charge were timely.
The panel held that the plaintiff’s claims based on a second administrative charge were untimely, but she could base her Title VII claims on the defendant’s alleged acts occurring after she filed her first administrative charge to the extent she could show such acts were part of a single hostile work environment claim.
The panel affirmed the district court’s grant of summary judgment only as to claims based on discrete discriminatory or retaliatory acts occurring after the plaintiff filed her first administrative charge. The panel otherwise reversed and remanded.
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Friday, April 27, 2018
Curry v. Equilon Enterprises, LLC
Curry v. Equilon Enterprises, LLC (CA4/2 E065764 4/26/18) Wage and Hour/”Employer”
Plaintiff and appellant Sadie M. Curry brought a class action case against defendant and respondent Equilon Enterprises, LLC, doing business as Shell Oil Products US (Shell). Curry’s causes of action included (1) failure to pay overtime compensation; (2) failure to pay for missed break periods; and (3) unfair business practices (Bus. & Prof. Code, § 17200). The trial court found Shell was not Curry’s employer and therefore granted Shell’s motion for summary judgment. Curry contends the trial court erred in its finding and by granting summary judgment. We affirm the judgment.
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Plaintiff and appellant Sadie M. Curry brought a class action case against defendant and respondent Equilon Enterprises, LLC, doing business as Shell Oil Products US (Shell). Curry’s causes of action included (1) failure to pay overtime compensation; (2) failure to pay for missed break periods; and (3) unfair business practices (Bus. & Prof. Code, § 17200). The trial court found Shell was not Curry’s employer and therefore granted Shell’s motion for summary judgment. Curry contends the trial court erred in its finding and by granting summary judgment. We affirm the judgment.
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Monday, April 16, 2018
Powell v. Bear Valley Community Hospital
Powell v. Bear Valley Community Hospital (CA4/1 D072616, field 3/26/18, pub. ord. 4/16/18) Medical Staff Privileges
The Board of Directors (the Board) of Bear Valley Community Hospital (Bear Valley) denied Dr. Robert O. Powell's advancement from provisional to active staff membership and reappointment to Bear Valley's medical staff. Dr. Powell appeals from the superior court judgment denying his petition for writ of mandate to void the Board's decision and for reinstatement of his medical staff privileges. We affirm.
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The Board of Directors (the Board) of Bear Valley Community Hospital (Bear Valley) denied Dr. Robert O. Powell's advancement from provisional to active staff membership and reappointment to Bear Valley's medical staff. Dr. Powell appeals from the superior court judgment denying his petition for writ of mandate to void the Board's decision and for reinstatement of his medical staff privileges. We affirm.
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Riske v. Superior Court
Riske v. Superior Court (CA2/7 B283035 4/16/18) Retaliation/Peace Officer Personnel Records
Robert Riske, a retired Los Angeles police officer, sued the City of Los Angeles alleging the Los Angeles Police Department had retaliated against him for protected whistleblower activity by failing to assign or promote him to several positions and selecting instead less qualified candidates. Riske filed a discovery motion pursuant to Evidence Code sections 1043 and 1045 to obtain certain summary personnel records relied on by the City in making assignment and promotion decisions. After the superior court erroneously ruled those records were not subject to discovery because the officers selected for the positions Riske sought were innocent third parties who had not witnessed or caused Riske’s injury, we issued a writ of mandate directing the superior court to vacate its order denying Riske’s discovery motion and to enter a new order directing the City to produce those records for an in camera inspection in accordance with section 1045. (See Riske v. Superior Court (2016) 6 Cal.App.5th 647, 664-665 (Riske I).)
The superior court conducted the in camera hearing and ordered the requested personnel records to be produced in accordance with the parties’ protective order. However, pursuant to section 1045, subdivision (b)(1), which excludes from disclosure “[i]nformation consisting of complaints concerning conduct occurring more than five years before the event or transaction that is the subject of the litigation” in which discovery or disclosure is sought, the court ordered redaction of all items in those reports concerning conduct that had occurred more than five years before Riske filed his complaint.
Riske again petitioned this court for a writ of mandate directing the superior court to order the City to produce those records without redaction. In response to our inquiry, both Riske and the City agree that, if section 1045, subdivision (b)’s five-year disclosure bar applies at all, it is measured from the date each officer was promoted instead of Riske—the alleged adverse employment action at issue in the litigation—and not the date Riske filed his complaint, as the superior court ruled. However, Riske also argues more broadly that section 1045, subdivision (b), which prohibits disclosure of stale complaints against police officers, has no application to the personnel reports sought in this case. We agree and grant the petition.
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Robert Riske, a retired Los Angeles police officer, sued the City of Los Angeles alleging the Los Angeles Police Department had retaliated against him for protected whistleblower activity by failing to assign or promote him to several positions and selecting instead less qualified candidates. Riske filed a discovery motion pursuant to Evidence Code sections 1043 and 1045 to obtain certain summary personnel records relied on by the City in making assignment and promotion decisions. After the superior court erroneously ruled those records were not subject to discovery because the officers selected for the positions Riske sought were innocent third parties who had not witnessed or caused Riske’s injury, we issued a writ of mandate directing the superior court to vacate its order denying Riske’s discovery motion and to enter a new order directing the City to produce those records for an in camera inspection in accordance with section 1045. (See Riske v. Superior Court (2016) 6 Cal.App.5th 647, 664-665 (Riske I).)
The superior court conducted the in camera hearing and ordered the requested personnel records to be produced in accordance with the parties’ protective order. However, pursuant to section 1045, subdivision (b)(1), which excludes from disclosure “[i]nformation consisting of complaints concerning conduct occurring more than five years before the event or transaction that is the subject of the litigation” in which discovery or disclosure is sought, the court ordered redaction of all items in those reports concerning conduct that had occurred more than five years before Riske filed his complaint.
Riske again petitioned this court for a writ of mandate directing the superior court to order the City to produce those records without redaction. In response to our inquiry, both Riske and the City agree that, if section 1045, subdivision (b)’s five-year disclosure bar applies at all, it is measured from the date each officer was promoted instead of Riske—the alleged adverse employment action at issue in the litigation—and not the date Riske filed his complaint, as the superior court ruled. However, Riske also argues more broadly that section 1045, subdivision (b), which prohibits disclosure of stale complaints against police officers, has no application to the personnel reports sought in this case. We agree and grant the petition.
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The Police Retirement System of St. Louis v. Page
The Police Retirement System of St. Louis v. Page (CA6 H043220 4/16/18) Antitrust Action on Employee Recruitment/Shareholders’ Derivative Action Statute of Limitations
In this derivative action, shareholders of Google, Inc. allege the corporation was harmed by executives who agreed to refrain from actively recruiting employees working for competitors. The trial court granted the defendants’ summary judgment motion, finding the action barred by the applicable statute of limitations. We will affirm.
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In this derivative action, shareholders of Google, Inc. allege the corporation was harmed by executives who agreed to refrain from actively recruiting employees working for competitors. The trial court granted the defendants’ summary judgment motion, finding the action barred by the applicable statute of limitations. We will affirm.
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