By John Norwood, Director of Government Relations
Probably the biggest story for most business organizations in 2019 will be how the Dynamex decision ends up affecting the status of its workers. Unless you have been living under a rock, you will recognize Dynamex as the California Supreme Court decision that changed decades of California law relative to how to determine if a person should be classified as either an employee or an independent contractor.
Although the Court’s decision was in March 2018, there is still little clarification relative to how this case will ultimately be determined. On one hand, the Dynamex case itself was a “wage order” case as opposed to a broader employment determination case. Basically, what this means is that if the worker is determined to be an employee for purposes of a wage order, then the classifying business is liable for making sure the worker received at least minimum wage, overtime, lunch and rest periods, penalties and attorney’s fees. Whereas, if a worker is determined to be misclassified as an independent contractor on a broader scale, the business would be liable for all mentioned above, plus failure to pay employment taxes, provide workers’ compensation insurance, unemployment insurance, healthcare and any other benefits provided to other workers of the firm.
Although it is true that a California Appellate Court in Garcia vs Border Transportation did recently limit the scope of the Dynamex decision to “wage orders,” this decision provides little relief for those businesses that are unable to prove that workers were an independent contractor under the strict ABC Test. They would still be liable for ensuring the worker received at least minimum wage, any overtime due, compensation for any missed meal or rest periods, state penalties for violation, generally double the amount due plus interest, and the workers attorney fees. In other words, limiting Dynamics to “wage orders” only speaks to the potential damages the misclassifying business could ultimately be responsible for paying.
Until further clarification by the courts and/or the Legislature, California businesses are faced with being in the unenviable position that a person they hire to help them is subject to the Dynamex decision for purposes of “wage orders” but the traditional Borello text for whether the person is an employee for other purposes. Where is all of this going in 2019 and how can employers and business operate in this environment? Is Dynamex retroactive? Can an employer be liable for violation of wage orders going back several years? All good questions.
Generally, the answers to these questions get parceled out over time by additional court decisions. For instance, even without another case, penalties for violation of state “wage orders” can be imposed upon businesses up to three or four years back if they occurred over that time period. However, the Supreme Court refused an opportunity to opine on whether Dynamex was itself retroactive. So that determination will apparently await another ruling. Now both organized labor and the state business community are off to the new California Legislature to try to resolve these issues.
Last year, the California State Chamber of Commerce and numerous other business organizations asked the Legislature to pass an emergency bill delaying the implementation of the Dynamex decision for two years while the Legislature determined if there were amendments and/or exceptions needed to the ABC Test. Organized Labor, who were all but gifted the Dynamex decision by the Supreme Court, weighed in and both the Senate and Assembly leadership refused to allow a vote on the issue.
On the first day of this year’s new Legislative session, Assemblywoman Lorena Gonzales, a former union organizer and Chairperson of the powerful Assembly Appropriations Committee, introduced AB 5 on behalf of the California Federation of Labor representing all the union groups in the state. AB 5 would expand the Dynamex decision from a “wage order” decision to apply across the board. The bill also puts the Labor Fed in a great position to play defense against legislative modifications, even if they are unable to pass the bill to expand the decision. Organized labor is already very powerful in Sacramento but now with Democrats controlling 61 of 80 votes in the Assembly, 29 of 40 votes in the Senate, and a labor friendly Governor, they are even more formidable.
Business interests are responding in kind. Last Fall, the state Chamber of Commerce organized a coalition of businesses and organizations to address the Dynamex decision. The point is not whether the Decision is right or wrong or employers should or should not use independent contractors, the point is that it should be the Legislatures’ job, not the courts, to change employment policy and debate the issues so that there can be legitimate and workable arrangements with those that choose to work as independent contractors.
The I’m Independent Coalition was established as a grassroots organization and public relations effort to support this cause. CPSA is a member of the coalition and pool industry members can join at no cost to take advantage of local meetings being organized by the coalition with legislators while they are in their districts on Fridays and Saturdays. You will find I’m Independent on Twitter, Facebook and you should be seeing the op-ed articles in your local newspapers and business journals. Over the next several weeks, there are numerous local meetings scheduled with Assembly members and Senators to hear from their constituents relative to this issue. If you join the coalition, you will be able to join these meeting and express your feeling on the issue directly to your State Senator or Assemblyperson.
In Sacramento, similar things are happening in the State Capitol. The coalition is scheduling meetings with all legislators and staff on the issue to brief them about the over 2 million Californian’s in various businesses who want to work as independent contractors. These individuals are threatened primarily by the B part of the Dynamex ABC Test. The goal of the coalition is, despite the influence of organized labor, to find a sweet spot where the B portion of the Dynamex text can be tweaked as it has in other states to allow for legitimate independent contractor relationships, and to push such an amendment through the California Legislature and get it signed by Governor Newsom.
It is expected that the debate over Dynamex will be one of the key issues this legislative session in Sacramento along with taxes, health care and privacy. Stay tuned as there are sure to be many more developments over the coming weeks and months. We will keep you updated as we learn of new developments.
As a member of CPSA, we commit to making sure your best interests are represented in the state of California. In addition, members have access to webinar recordings on the membership website, including the highly attended Dynamex Decision webinar from August 23, 2018 that explained the decision in more detail. To become a member, visit our website at www.thecpsa.org and click Join. For questions or comments, contact CPSA at firstname.lastname@example.org or call 916-447-4113.