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On July 25, 2024, the California Supreme Court ruled in the case of Castellanos v. State of California that Proposition 22, also known as App-Based Drivers as Contractors and Labor Policies Initiative, is constitutional. The statewide ballot measure from 2020 exempts certain app-based drivers from California’s independent contractor classification law. This decision will significantly impact ongoing gig economy litigation as well as potential future litigation.

In 2021, drivers for services including Uber Technologies Inc., Lyft Inc. and DoorDash Inc., joined with the Service Employees International Union and its California chapter to challenge Proposition 22. The drivers and union claimed that the voter-approved ballot measure passed in November 2020 must be struck down because it infringed on the California legislature’s power to set workers’ compensation laws. During the May 2024 oral arguments in San Francisco, the justices appeared skeptical of the drivers’ position, expressing concerns about the chilling effect on future ballot initiatives and questioning why the legislature simply could not create new workers’ compensation laws in response. The court concluded that Article XIV, section 4 of the California Constitution does not limit the ability of California voters to enact laws through the initiative process that touch on workers’ compensation, rendering Prop 22 constitutional.Continue Reading California Supreme Court upholds Prop 22: California gig drivers to remain contractors

On May 6, 2024, the California Supreme Court issued a significant ruling in Naranjo v. Spectrum Security Services, Inc. (Case No. S279397). The decision provides much-needed clarity on California’s wage statement requirements and also held that employers can assert a good faith defense to wage statement claims under appropriate circumstances.

Labor Code section 226 states that California employers must provide employees with accurate itemized wage statements. Employees can seek statutory penalties if an employer fails to provide accurate itemized wage statements and such failure is “knowing and intentional”. (Lab. Code, section 226, subd. (e)(1).). While the statutory penalties are capped at $4,000 per employee (in addition to the employees’ associated attorneys’ fees and costs), the aggregated wage statement penalties can add up quickly in the class action context.Continue Reading Key victory for California employers: California Supreme Court accepts good faith defense to wage statement violations

In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court departed from the longstanding view that non-exempt employees’ meal and rest break premiums are paid at the employee’s base hourly rate, rather than the employee’s regular rate of pay used to calculate overtime pay. Instead, the Court held that the phrase “regular rate…

The California Supreme Court ruled on March 12, 2020 that an individual plaintiff’s settlement of their claims against an employer for purported wage and hour violations does not deprive that plaintiff of standing as an authorized representative in a Private Attorney General’s Act (PAGA) action.

PAGA deputizes an employee to file a lawsuit for purported California Labor Code violations against their employer to recover civil penalties on behalf of themselves, other similarly situated employees and the State of California. To pursue a PAGA action, the plaintiff must have standing as an “aggrieved employee.” PAGA defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”

In Kim v. Reins International California, Inc., March 12, 2020, Case No. 5246911, Justin Kim, an employee of Reins International (Reins), brought a putative class action and PAGA representative action for Labor Code violations against his employer. While the case was pending, Reins moved to compel arbitration as to Kim’s individual claims and dismissed the class action claims based on the arbitration agreement. While the PAGA litigation remained in the trial court, the trial court stayed the action pending the arbitration of Kim’s individual claims. Kim ultimately settled his individual claims and dismissed them, leaving only the PAGA claim for resolution. Reins then moved for summary adjudication of the PAGA claim on the ground that Kim was no longer an aggrieved employee and his rights had been “completely redressed” by his own settlement and dismissal of his underlying claims. The trial court granted the dismissal and the Court of Appeals affirmed.Continue Reading California Supreme Court: Employees who settle their own wage and hour claims still have standing to pursue PAGA

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