Articles Posted in Independent Contractors

Of the estimated 50,000 Uber drivers operating in California, thirty of them have started a classaction lawsuit against the company.  The complaint claims that Uber has been misclassifying all of its California drivers as independent contractors rather than employees ever since the Dynamex case was decided.     

Dynamexof courseis the California Supreme Court decision, published on April 30, 2018, that proclaimed that the ABC Test is the proper test for determining whether someone is an independent contractor or an employee. The decision was a significant departure from previous case law on worker classification.  Notably, the ABC Test presumes that someone is an employee unless the hiring entity can demonstrate all three parts of the ABC Test.  In this way, Dynamex almost completely shifted the burden of proof in misclassification cases from workers to hiring entities.   

Nevertheless, Uber has asserted since Dynamex that it can and will continue to treat all of its California drivers as independent contractors.  Accordingly, in this new lawsuit, it will be Uber’s burden to prove all of the following 

Proper classification of independent contractors and employees has never been simple, and the passage of California’s new gig law Assembly Bill 5 (“AB5”) ensures this issue will continue to pose challenges for workers and businesses alike. AB5 took effect on January 1, 2020. While the full impact of this new legislation is yet to be seen, there are legitimate concerns about how this law will impact musicians and other independent artists.

What is AB5?

AB5 is the legislative result of the Dynamex decision, whereby the California Supreme Court employed a three-part test to determine employment status and ultimately concluded that Dynamex delivery drivers were employees and not independent contractors. Dynamex Operations W. v. Superior Court, 4 Cal.5th 903, 942 (2018).

Some things seem certain for gig economy companies like Uber in 2020:  they will continue to accrue legal fees and continue to claim they are just “mobile application platforms” and emphatically not service providers.   Let’s look at Uber as an example.  

Even as it defends against multiple lawsuits brought by its drivers, Uber is now suing the State of California. Case No. 2:19-cv-10956. 

The central issue in these lawsuits is whether Uber’s operations constitute a legitimate business model matching independent drivers to riders needing rides, or whether Uber is just a modern profit machine rebuilt from the age-old cogs and widgets of exploited workers 

The new “Gig Economy Law”  also known as Assembly Bill 5 (AB5) – was signed into law on September 18, 2019.  How much the law will actually impact California companies, employees and independent contractors has been a hot topic ever since.   Here are five things you should know about AB5: 

1.  The law’s intent is to guard against further “erosion of the middle class and the rise in income inequality,” and to protect workers from being exploited in the gig economy. 

Experts estimate that it is up to 30% cheaper to hire independent contractors than employees because then companies aren’t required to pay for things like unemployment insurance, workers’ compensation premiums, payroll taxes or Social Security contributions. 

A California appeals court has just ruled to allow a Domino’s sexual harassment claim to proceed, finding that claims against a franchisor for a franchisee supervisor’s actions are not barred by an independent contractor designation. The case in question, Patterson v. Domino’s Pizza LLC, is an example of the greater protections afforded to employees in California working at franchise restaurants against harassment and intimidation at the workplace.

Patterson v. Domino’s Pizza was brought by a 16-year old former employee at a Domino’s franchise in Ventura County, California. The franchise, Domino’s Sui Juris LLC, was among one of the 9,000 such stores making up one of the largest franchise systems in the world. The employee alleged sexual harassment and assault by one of her supervisors at Sui Juris, bringing suit against the Sui Juris franchise, her supervisor and Domino’s Pizza, Inc. Sui Juris declared bankruptcy, leaving Domino’s Inc. the only defendant able to sustain a potentially massive award. The lower court entered summary judgment for Domino’s Pizza Inc., finding that as a franchisor it could not be liable for the torts of its independent contractor franchisee Sui Juris LLC. Patterson appealed, and the California appeals court reversed, finding there to be a triable issue of fact as to whether Domino’s could be liable for the torts of its franchisee Sui Juris LLC.

In finding that franchisor Domino’s Inc. could be liable for the torts of employees at its franchisee store, the California court relied on its earlier precedent for determining vicarious liability for franchisors in the state. California is unique in the nation for its flexibility in determining an independent contractor relationship for franchises. California courts will not rely on a franchisor agreement, but will instead look to the actual control a franchisor has over its franchisee in determining whether the franchisee is an independent contractor.

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