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Anne Cherry Barnett

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As we have previously reported here, California Assembly Bill 5 (the bill) is slated to codify the California Supreme Court’s 2018 landmark decision in Dynamex Operations West v. Superior Court of Los Angeles, requiring companies to apply the “ABC” test in classifying their workers. The ABC test requires that workers be considered “employees” instead of “independent contractors” if their work is part of the employer’s regular business, or if the employer exercises control over how its workers complete their jobs.

Yesterday, the California Senate approved the bill as currently drafted and returned it to the State Assembly, as a matter of formality, where it is expected to be approved. The bill received much opposition from various gig-economy companies despite Governor Gavin Newsom’s endorsement. Once the Assembly passes the bill, Governor Newsom is expected to sign it into law, with an effective date of January 1, 2020. The bill will apply to many workers previously classified as independent contractors, and will apply to app-based companies operating in the gig-economy space, which will notably transform the gig economy in California.

In recent months, the bill was amended to include various carveouts for approximately 50 industries, including salon workers, insurance agents, doctors, lawyers, accountants, and securities brokers.

Notably absent from the current form of the bill is an exclusion for gig-economy workers. App-based companies have traditionally operated on a business model that touts the flexibility of the independent contractor model, which has been embraced by many gig workers, notwithstanding the lack of legal protections afforded to employees in the areas of earnings and benefits. However, if the bill is signed into law in its current form, gig-economy workers will be considered employees entitled to labor protections, which will likely increase the amount of wages and benefits such workers currently earn.

It is anticipated that the bill will have far-reaching consequences in California, affecting approximately 1 million workers previously classified as independent contractors and companies whose business models are based on utilizing independent contractors, who tend to be less expensive than employees. Once the bill is signed into law, most workers will likely need to be classified as employees entitled to minimum wage, overtime, and unemployment benefits. These newly classified employees may also gain the right to join a labor union.
Continue Reading California leads the way in passing landmark legislation to classify gig workers as employees

In April 2018, the California Supreme Court turned worker classification on its head when it decided Dynamex Operations West Inc v. Superior Court (Dynamex). In Dynamex, the court adopted a three-factor “ABC” test for analyzing misclassification claims under the California Wage Orders. Under the ABC test, for an employer to show that workers were properly classified as independent contractors, they must demonstrate that: the worker (A) was not under the company’s direct control and direction; (B) performed work that was outside the usual course of the hiring entity’s business; and (C) was customarily engaged in an independent business. Because of, in particular, the second element of the test, this standard makes it very difficult for businesses to prove that workers are independent contractors.

Since last year’s ruling in Dymanex, there has been much speculation about the application of the decision, specifically whether it applies retroactively and the scope of any application of the “ABC” test.

To the shock of employers, on May 2, 2019, a unanimous three-judge panel of the Ninth Circuit of the United States Court of Appeals (the Panel), in Vasquez v. Jan-Pro Franchising International, Inc. (Jan-Pro), held that the Dynamex rule should be applied retroactively.Continue Reading Dynamex in retrograde – misclassification test and its retroactive reach may open the flood gates for misclassification cases in California

In a recent decision involving retail store employees, the Second Appellate District Court held that employees subject to on-call scheduling must be paid reporting time pay, even when the employee only has to make a short call to determine if they are needed, but does not physically report to work.

The case, Skylar Ward v. Tilly’s Inc., Case Number B280151, involved a putative class action complaint filed by Plaintiff Skylar Ward (Plaintiff), a former sales clerk in a Tilly’s store. In the complaint, Plaintiff alleged that Wage Order 7 mandated that nonexempt retail employees be paid “reporting time pay” if either “an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work” or “an employee is required to report to work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting.” (Cal. Code Regs., tit. 8, § 11070, subd. (5).) Specifically, Plaintiff contended that Tilly’s scheduling policy required employees to call in while on-call, disciplined employees for late or missed call-ins, and made call-in and reporting mandatory. Thus, Plaintiff alleged that when on-call employees contact Tilly’s two hours before on-call shifts they are reporting for work within the meaning of the wage order, and thus are owed reporting time pay.

The trial court sustained the demurrer by defendant Tilly’s on the grounds that Plaintiff is not entitled to reporting time pay under the Wage Order because: (1) the phrase “report to work” means that an employee physically appears at the workplace, and; (2) that merely calling in to learn whether an employee will work a call-in shift does not trigger reporting time pay under Wage Order 7. Continue Reading California on call shifts may qualify for paid reporting time pay

San Francisco’s Office of Labor Standards Enforcement (OLSE) continues to raise the cost of doing business at the foot of the Golden Gate by requiring employers to provide some of the most generous benefits to employees in the United States. The OLSE has amended certain of its rules regarding employer obligations, and will begin enforcing these changes (adopted by San Francisco voters and the City’s Board of Supervisors) as of January 1, 2019. Below are some of the highlights employers should consider as they make their way in the new year:

  • Health Care Security Ordinance (HCSO) increases the minimum dollar amount employers must spend on health care on behalf of all covered employees (those who have been employed for more than 90 days and who regularly work at least eight hours per week in the City of San Francisco). As of 2019, San Francisco employers with 20–99 employees worldwide must spend $1.95 per hour, and those with 100 or more employees worldwide must spend $2.93 per hour. Businesses with less than 20 employees remain exempt from the HCSO.

The 2019 “Exemption Threshold” (minimum amount for managerial, supervisory, and confidential employees to be exempt from the HCSO) has increased to $48.46 per hour or $100,796 per year.Continue Reading San Francisco increases costs and requirements for employers in 2019