In recent weeks the California and U.S. Supreme Courts have been busy making history on both sides of the employment law bar.
California Supreme Court Redefines Independent Contractor Test
On April 30, 2018 the California Supreme Court in Dynamex Operations West Inc., v. Superior Court of Los Angeles County et al., redefined the test employers must use in determining whether or not an individual qualifies as an independent contractor or an employee. Pre-Dyamex, businesses could apply various state and federal schemes to create alternate business models centered around overall growth projections fueled by engaging independent contractors. Reliance on this type of an alternate model required finesse. Success (risk avoidance) was to be achieved only through correct interpretation and application of a complex and highly subjective multi-factor test.
With its Dynamex ruling the Court tightens guidelines for determining whether or not an independent contractor is truly independent. Moving forward employers must now answer three questions – all in the affirmative – in order to correctly classify an individual as an independent contractor. If an employer can affirmatively establish: A) the worker is free from the control and direction of the employer in connection with the performance of the work (under contract and in fact); B) the worker performs work that is outside the usual course of the hiring entity’s business; and C) the worker customarily engages in an independently established trade, the worker may then be properly classified as independent.
Dynamex is as close to a bright-line rule on the independent contractor v. employee debate as California employers are likely to get.
U.S. Supreme Court Rejects Generations of Precedent on Arbitration Class Waivers
On May 21, 2018, in a monumental ruling, the U.S. Supreme Court decided in Epic Systems Corp. v. Lewis to break with years of workplace precedent in holding that class action waivers are now enforceable in employer arbitration agreements under the Federal Arbitration Act. Rejecting the National Labor Relation Board’s (NLRB) long held position that federal law prohibits class action waivers in arbitration agreements, the Court cited legislative intent in support of its position that arbitration agreements be enforced in accordance with the terms, conditions and rules agreed to therein.
It will be interesting going forward to see if California precedent holds in exempting the enforceability of Private Attorney General Act (PAGA) in arbitration. PAGA claims are representative actions not class actions. Since 2014 California has held the position that waivers of an employee’s right to bring a representative action are “contrary to public policy and unenforceable as a matter of state law.” (Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014)).
WORKPLACE PERSPECTIVE: Raising The Bar At Workplaces Everywhere!
Watch for this month’s Workplace Perspective podcast as we take a more in-depth look at the California Supreme Court’s Dynamex ruling and its potential impacts on California employers and employees.
This legal update does not constitute legal advice. You should consult with an attorney concerning your individual situation. For more information on these and other cases impacting California employer and employees, please contact SAFFIRE LEGAL, PC at [email protected] or (949) 535-5266.
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