Raymond Greene Defends employers in a wide range of employment matters including state and federal wage and hour litigation, independent misclassification issues, discrimination actions and State Labor Commissioner claims. He represents transportation industry clients in catastrophic personal injury/wrongful death/traumatic brain injury cases. He Coordinates multidisciplinary response to catastrophic events as a member of Burnham Brown's
24-Hour Client Response Team.
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Now that the dust has settled in the aftermath of the California Supreme Court ruling in the landmark Dynamex Operations West, Inc. v. Superior Court case, it is clear that the landscape for transportation companies using independent contractor drivers in California has drastically changed. In expanding the definition of employee and creating a new standard  where workers are presumed to be employees, the Court has set in motion a ripple effect that transportation companies need to closely monitor. Among the early important takeaways in the post-Dynamex era are:
1. Retroactive v. Prospective Application: The California Supreme Court recently denied the petition for rehearing by Dynamex as to the issue of whether or not the ABC test should be applied retroactively or prospectively. Although the Court in essence declined to provide guidance as to whether the new test applies to pending cases or only those filed after the opinion was issued, court rulings in other cases strongly suggest that the ABC test will be applied retroactively. In fact, the Plaintiff Bar is already challenging prior unsuccessful rulings by courts who have denied claims of independent contractor reclassification by arguing that the ABC test should apply retroactively.
2. Wage and Hour Class Action is not the Only Risk for Independent Contractor Misclassification: Although wage and hour litigation in a class action setting certainly constitutes the potentially most devastating exposure, the Dynamex decision certainly opens the door for a host of other exposures to transportation companies doing business in California. Transportation employers will also be at risk for traditional employment-related causes of action such as harassment, discrimination and failure to provide workers' compensation insurance and other employee-related benefits.
3. Relying on the Owner-Operator Model is a Risky Proposition: Companies can no longer rely solely on the preference of drivers who want to operate independently. The Dynamex decision clearly demonstrates the stronger court interest in California in ensuring the preservation of worker rights to wage and hour benefits over driver preference for independence. As a result, many companies are considering adopting an alternative independent contractor model in which the motor carrier uses broker or freight forward authority to contract with the owner-operators who are working under their own independent motor carrier authority.
4. The Bar for Wage and Hour Class Certification is Lower : The Dynamex Court upheld the trial court's certification of a class of delivery drivers. The Court found that there was a sufficient commonality of interest as to whether Prong B of the ABC test was met because the employer was a delivery company. The Court reasoned that the question of whether the work performed by the drivers was outside the usual course of the business of the delivery company was amenable to determination on a class-wide basis. In Dynamex, the class of drivers certified by the trial court was limited to drivers who performed delivery services only for the company.
5. Prong B of the ABC Test is a Major Hurdle for the Use of Owner-Operators in California: Prong B changes prior standards by requiring an employer to demonstrate that a worker is not performing a duty or service that is provided with the usual course of the employer's business. The Court illustrated this Prong by using an example that a retailer who hires a plumber or electrician to perform maintenance will be able to demonstrate the independent contractor status of that worker. However, in situations where drivers are performing the identical service of the defendant company (i.e. making deliveries), transportation companies face an almost insurmountable task to satisfy this Prong.
6. Federal Preemption Exempting Motor Carriers from Complying with State Laws is Being Pursued Legislatively and through the Courts: The Western States Trucking Association (WSTA) recently filed a complaint for declaratory and injunctive relief in the United States District Court, Eastern District of California. The WSTA seeks a declaration that the Dynamex decision is preempted by federal law and argues that California's interpretation of the applicable wage order in Dynamex means that independent contractor drivers will be instantly transformed as a matter of law into employees upon crossing into and through California. The WSTA also contends that the Federal Aviation Administration Authorization Act of 1994 (FAAAA), which prohibits any state from enacting any law relating to the price, route or service of a motor carrier, preempts the California wage order. Even if the WSTA action fails in the 9th Circuit Court of Appeals, a split of authority in other states sets up the WSTA case as a potential matter to be heard by the United States Supreme Court. In addition, current legislation offered by Rep. Jeff Denham of California seeks to exempt motor carriers from complying with state laws that require employers to provide meal and rest breaks to employees. It would also preempt state rules on misclassification of truck drivers.
In sum, the Dynamex decision demonstrates a clear judicial preference in California to protect the state interest in ensuring workers' rights to wage and hour benefits over the interests of drivers who want to operate independently. In publishing this preference, the Court has created significant exposure for transportation companies via wage and hour and class action litigation and various traditional employment related theories. Therefore, it is crucial for transportation companies to monitor subsequent Court decisions or legislative changes that may limit Dynamex. And in the alternative, consideration should be given to different business models with drivers in the state.
 The Dynamex ABC test requires an employer to demonstrate all of the following prongs for a worker to be considered an independent contractor: (a) the worker is free from the control and direction of the hirer in connection with the performance of the work; (b) the worker performs work which is outside the usual scope of the employer's business; and (c) the worker is customarily engaged in an independent trade (i.e., taken steps to create their own independent business.)
|This article is presented for informational purposes only and is not intended to constitute legal advice.