Dynamex Operations W., Inc. v. Superior Court of L. A. Cnty.
416 P.3d 1, 4 Cal.5th 903, 232 Cal. Rptr. 3d 1 (2018)
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Rule of Law:
For the purposes of California wage orders, a worker is presumed to be an employee unless the hiring entity can establish all three prongs of the 'ABC test': (A) the worker is free from the control and direction of the hirer; (B) the worker performs work outside the usual course of the hiring entity's business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business.
Facts:
- Dynamex Operations West, Inc. (Dynamex) is a nationwide same-day courier and delivery service.
- Prior to 2004, Dynamex classified its California drivers as employees.
- In 2004, Dynamex reclassified all of its drivers as independent contractors, concluding this would generate economic savings.
- Under the new policy, drivers were required to provide their own vehicles and pay for all transportation and work-related expenses, including fuel, tolls, insurance, and taxes.
- Dynamex obtained its own customers, set the rates for those customers, and negotiated payment amounts with its drivers individually.
- Drivers were generally expected to wear Dynamex shirts and badges, and for some clients, were required to attach Dynamex decals to their personal vehicles.
- Dynamex assigned deliveries to its drivers through dispatchers, though drivers could decline assignments.
- Dynamex retained the authority to terminate its agreement with any driver without cause upon three days' notice.
Procedural Posture:
- Charles Lee and Pedro Chevez filed a class action lawsuit against Dynamex in a California trial court, alleging misclassification as independent contractors.
- The trial court initially denied the plaintiffs' motion for class certification.
- On appeal, the California Court of Appeal reversed the trial court's denial of class certification.
- On remand, the trial court granted the motion for class certification, finding that the broad definitions of 'employ' in the applicable wage order, as interpreted in Martinez v. Combs, governed the analysis.
- Dynamex filed a motion to decertify the class, which the trial court denied.
- Dynamex petitioned the Court of Appeal for a writ of mandate to compel the trial court to decertify the class.
- The Court of Appeal largely upheld the trial court, ruling that the wage order definitions applied to wage-order-based claims, but that the common law Borello test applied to other statutory claims.
- Dynamex filed a petition for review in the California Supreme Court, challenging the Court of Appeal's conclusion that the wage order definitions of employment apply to the employee versus independent contractor question.
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Issue:
For claims governed by California wage orders, does the 'suffer or permit to work' definition of employment require the application of the 'ABC test' to determine whether a worker is an employee or an independent contractor?
Opinions:
Majority - Cantil-Sakauye, C.J.
Yes, for claims governed by California wage orders, the 'suffer or permit to work' definition requires application of the ABC test. The wage order's definition must be interpreted broadly to protect workers by treating as employees all individuals who can reasonably be viewed as working in the hiring entity's business. To distinguish genuine independent contractors from employees in this context, the court adopts the ABC test, which presumes a worker is an employee unless the hiring entity proves all three of the following: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. This structured test provides greater clarity and predictability than the common law multi-factor test from Borello and is more consistent with the history and remedial purpose of California's wage orders.
Analysis:
This decision represents a monumental shift in California employment law, moving from the flexible, multi-factor Borello test to the rigid, pro-employee ABC test for wage order claims. By making it significantly more difficult to classify workers as independent contractors, the ruling has profound implications, particularly for the 'gig economy' and industries reliant on contract labor. The precedent set by Dynamex requires businesses to re-evaluate their classification of workers, as failing any single prong of the ABC test results in employee status. This decision has led to widespread litigation and legislative responses, fundamentally altering the legal landscape for worker classification in California.
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