Articles Posted in Independent Contractors

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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