4 Cal.5th 903, S222732, Dynamex Operations West, Inc. v. Superior Court (Charles Lee)

Docket NºS222732
Citation4 Cal.5th 903, 416 P.3d 1, 232 Cal.Rptr.3d 1
Opinion JudgeCANTIL-SAKAUYE, C.J.
Party NameDYNAMEX OPERATIONS WEST, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; Charles Lee et al., Real Parties in Interest.
AttorneyLittler Mendelson, Robert G. Hulteng, Damon M. Ott, Philip A. Simpkins; Sheppard Mullin Richter & Hampton, Paul S. Cowie; DLA Piper and Ellen M. Bronchetti for Petitioner. Orrick, Herrington & Sutcliffe, Andrew R. Livingston, Michael Weil, Lauri Damrell and Kathryn G. Mantoan for California Emplo...
Judge PanelWE CONCUR: CHIN, J., CORRIGAN, J., LIU, J., CUÉLLAR, J., KRUGER, J., SIGGINS, J.
Case DateApril 30, 2018
CourtSupreme Court of California

Page 903

4 Cal.5th 903

416 P.3d 1, 232 Cal.Rptr.3d 1

DYNAMEX OPERATIONS WEST, INC., Petitioner,

v.

The SUPERIOR COURT of Los Angeles County, Respondent;

Charles Lee et al., Real Parties in Interest.

No. S222732

Supreme Court of California

April 30, 2018

[416 P.3d 4] [232 Cal.Rptr.3d 4] Ct.App. 2/7 B249546, Los Angeles County Super Ct. No. BC332016.

Page 904

[Copyrighted Material Omitted]

Page 905

[Copyrighted Material Omitted]

Page 906

[Copyrighted Material Omitted]

Page 907

[Copyrighted Material Omitted]

Page 908

[Copyrighted Material Omitted]

Page 909

[Copyrighted Material Omitted]

Page 910

[Copyrighted Material Omitted]

Page 911

COUNSEL

Littler Mendelson, Robert G. Hulteng, Damon M. Ott, Philip A. Simpkins; Sheppard Mullin Richter & Hampton, Paul S. Cowie; DLA Piper and Ellen M. Bronchetti for Petitioner.

Orrick, Herrington & Sutcliffe, Andrew R. Livingston, Michael Weil, Lauri Damrell and Kathryn G. Mantoan for California Employment Law Council and Employers Group as Amici Curiae on behalf of Petitioner.

Horvitz & Levy, John A. Taylor, Jeremy B. Rosen, Felix Shafir and David W. Moreshead for Chamber of Commerce of the United States of America and California Chamber of Commerce as Amici Curiae on behalf of Petitioner.

No appearance for Respondent.

Pope, Berger & Williams, Pope, Berger, Williams Reynolds, A. Mark Pope; Glancy Binkow & Goldberg, Glancy Prongay & Murray, Kevin F. Ruf; Boudreau Williams, Williams Iagmin and Jon R. Williams for Real Parties in Interest.

Della Barnett, R. Erandi Zamora; Anthony Mischel; Cynthia L. Rice, William G. Hoerger and Jean H. Choi for California Rural Legal Assistance Foundation, National Employment Law Project, Los Angeles Alliance for a New Economy, La Raza Centro Legal, Legal Aid Society-Employment Law Center, Asian Americans Advancing Justice-LA, Asian Americans Advancing Justice-ALC, The Impact Fund, Alexander Community Law Center, UCLA Center for Labor Research, Women’s Employment Rights Clinic and Worksafe as Amici Curiae on behalf of Real Parties in Interest.

Duckworth Peters Lebowitz Olivier and Monique Olivier for California Employment Lawyers Association as Amicus Curiae on behalf of Real Parties in Interest.

Counsel: Judith A. Scott; Altshuler Berzon, Michael Rubin, Barbara J. Chisholm, P. Casey Pitts; Nicole G. Berner; Nicholas W. Clark; and Bradley T. Raymond for Service Employees International Union, United Food and Commercial Workers International Union and International Brotherhood of Teamsters as Amici Curiae on behalf of Real Parties in Interest.

David Balter for Division of Labor Standards Enforcement, Department of Industrial Relations as Amicus Curiae on behalf of Real Parties in Interest.

OPINION

CANTIL-SAKAUYE, C.J.

Page 912

[232 Cal.Rptr.3d 5] Under both California and federal law, the question whether an individual worker should properly be classified as an employee or, instead, as an independent contractor has considerable significance for workers, businesses, and the public generally.1 On the one [416 P.3d 5] hand, if

Page 913

a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. The worker then obtains the protection of the applicable labor laws and regulations. On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits, and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.

Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair [232 Cal.Rptr.3d 6] competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees. In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled.2

The issue in this case relates to the resolution of the employee or independent contractor question in one specific context. Here we must decide what standard applies, under California law, in determining whether workers should be classified as employees or as independent contractors for purposes of California wage orders, which impose obligations relating to the minimum

Page 914

wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.3

In the underlying lawsuit in this matter, two individual delivery drivers, suing on their own behalf and on behalf of a class of allegedly similarly situated drivers, filed a complaint against Dynamex Operations West, Inc. (Dynamex), a nationwide package and document delivery company, alleging that Dynamex had misclassified its delivery drivers as independent contractors rather than employees. The drivers claimed that Dynamex’s alleged misclassification of its drivers as independent contractors led to Dynamex’s violation of the provisions of Industrial Welfare Commission wage order No. 9, the applicable state wage order governing the transportation industry, as well as various sections of the Labor Code, and, as a result, that Dynamex had engaged in unfair and unlawful business practices under Business and Professions Code section 17200.

Prior to 2004, Dynamex classified as employees drivers who allegedly performed similar pickup and delivery work as the current [416 P.3d 6] drivers perform. In 2004, however, Dynamex adopted a new policy and contractual arrangement under which all drivers are considered independent contractors rather than employees. Dynamex maintains that, in light of the current contractual arrangement, the drivers are properly classified as independent contractors.

After an earlier round of litigation in which the trial court’s initial order denying class certification was reversed by the Court of Appeal (Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325, 83 Cal.Rptr.3d 241), the trial court ultimately certified a class action embodying a class of Dynamex drivers who, during a pay period, did not themselves employ other drivers [232 Cal.Rptr.3d 7] and did not do delivery work for other delivery businesses or for the drivers’ own personal customers. In finding that the relevant common legal and factual issues relating to the proper classification of the drivers as employees or as independent contractors predominated over potential individual issues, the trial court’s certification order relied upon the three alternative definitions of " employ" and " employer" set forth in the applicable wage order as discussed in this court’s then-recently decided opinion in Martinez v. Combs (2010) 49 Cal.4th 35, 64, 109 Cal.Rptr.3d 514, 231 P.3d 259 (Martinez ). As described more fully below, Martinez held that " [ ]o employ ... under the [wage order], has three alternative definitions. It means: (a) to exercise control over the wages, hours, or working conditions, or (b) to suffer or

Page 915

permit to work, or (c) to engage, thereby creating a common law employment relationship." (49 Cal.4th at p. 64, 109 Cal.Rptr.3d 514, 231 P.3d 259.) The trial court rejected Dynamex’s contention that in the wage order context, as in most other contexts, the multifactor standard set forth in this court’s seminal decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399 (Borello ) is the only appropriate standard under California law for distinguishing employees and independent contractors.

In response to the trial court’s denial of Dynamex’s subsequent motion to decertify the class, Dynamex filed the current writ proceeding in the Court of Appeal, maintaining that two of the alternative wage order definitions of " employ" relied upon by the trial court do not apply to the employee or independent contractor issue. Dynamex contended, instead, that those wage order definitions are relevant only to the distinct joint employer question that was directly presented in this court’s decision in Martinez — namely whether, when a worker is an admitted employee of a primary employer, another business or entity that has some relationship with the primary employer should properly be considered a joint employer of the worker and therefore also responsible, along with the primary employer, for the obligations imposed by the wage order.

The Court of Appeal rejected Dynamexs contention, concluding that neither the provisions of the wage order itself nor this courts decision in Martinez supported the argument that the wage orders definitions of " employ" and " employer" are limited to...

To continue reading

FREE SIGN UP
308 practice notes
  • Independent Contractor Status Under the Fair Labor Standards Act
    • United States
    • Labor Department,Wage And Hour Division
    • Invalid date
    ...the economic reality test in favor of the ABC test adopted by the California Supreme Court in Dynamex Operations West v. Superior Court, 416 P.3d 1 (2018). By contrast, other commenters, such as the American Society of Travel Advisors (ASTA) and National Federation of Independent Business (......
  • Huddleston v. John Christner Trucking, LLC, 113018 OKNDC, 17-CV-549-GKF-FHM
    • United States
    • Federal Cases United States District Courts 10th Circuit Northern District of Oklahoma
    • November 30, 2018
    ...quasi-legislative regulations that have the force of law.” Dynamex Operations W. v. Superior Court, 416 P.3d 1, 5 n.3 (2018). In particular, Wage Order 9-2001 regulates working conditions for “employees” in the transportation industry. See Cal. Code Regs., tit. 8, §......
  • 40 Cal.App.5th 1131, B282377, Gonzales v. San Gabriel Transit, Inc.
    • United States
    • California California Court of Appeals
    • October 8, 2019
    ...While this appeal was pending, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 (Dynamex ), in which it adopted the "ABC test" used in other jurisdictions to streamline......
  • A Patent Perspective on Autonomous Vehicles
    • United States
    • Landslide Nbr. 11-5, May 2019
    • May 1, 2019
    ...one of the various factors to be considered in the event of a dispute over copyright ownership and worker classification. n Endnotes 1. 4 Cal. 5th 903 (2018). 2. California’s Industrial Welfare Commission regulates the California wage orders, which provide the wage, hour, and working condit......
  • Free signup to view additional results
87 cases
  • Huddleston v. John Christner Trucking, LLC, 013020 OKNDC, 17-CV-549-GKF-FHM
    • United States
    • Federal Cases United States District Courts 10th Circuit Northern District of Oklahoma
    • January 30, 2020
    ...to work, or (c) to engage, thereby creating a common law employment relationship.” Dynamex Operations W. v. Superior Court, 416 P.3d 1, 10 (2018) (quoting Martinez v. Combs, 231 P.3d 259, 278 (Cal. 2010)). In Dynamex, the California Supreme Court developed what ......
  • Huddleston v. John Christner Trucking, LLC, 113018 OKNDC, 17-CV-549-GKF-FHM
    • United States
    • Federal Cases United States District Courts 10th Circuit Northern District of Oklahoma
    • November 30, 2018
    ...quasi-legislative regulations that have the force of law.” Dynamex Operations W. v. Superior Court, 416 P.3d 1, 5 n.3 (2018). In particular, Wage Order 9-2001 regulates working conditions for “employees” in the transportation industry. See Cal. Code Regs., tit. 8, §......
  • 40 Cal.App.5th 1131, B282377, Gonzales v. San Gabriel Transit, Inc.
    • United States
    • California California Court of Appeals
    • October 8, 2019
    ...While this appeal was pending, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 (Dynamex ), in which it adopted the "ABC test" used in other jurisdictions to streamline......
  • James v. Uber Technologies Inc., 012621 CANDC, 19-cv-06462-EMC
    • United States
    • Federal Cases United States District Courts 9th Circuit Northern District of California
    • January 26, 2021
    ...a new test for distinguishing between employees and independent contractors in Dynamex Operations W. v. Superior Court, 416 P.3d 1 (Cal. 2018), reh'g denied (June 20, 2018). Under the so-called “ABC” test, workers are presumptively considered to be employees unless ......
  • Free signup to view additional results
209 firm's commentaries
6 books & journal articles
  • A Patent Perspective on Autonomous Vehicles
    • United States
    • Landslide Nbr. 11-5, May 2019
    • May 1, 2019
    ...one of the various factors to be considered in the event of a dispute over copyright ownership and worker classification. n Endnotes 1. 4 Cal. 5th 903 (2018). 2. California’s Industrial Welfare Commission regulates the California wage orders, which provide the wage, hour, and working condit......
  • Machines of Ordinary Skill in the Art: How Inventive Machines Will Change Obviousness
    • United States
    • Landslide Nbr. 11-5, May 2019
    • May 1, 2019
    ...one of the various factors to be considered in the event of a dispute over copyright ownership and worker classification. n Endnotes 1. 4 Cal. 5th 903 (2018). 2. California’s Industrial Welfare Commission regulates the California wage orders, which provide the wage, hour, and working condit......
  • Dynamex Is Dynamite, but Epic Systems Is Its Foil - Chamber of Commerce: The Sleeper in the Trilogy.
    • United States
    • Missouri Law Review Vol. 83 Nbr. 4, September 2018
    • September 22, 2018
    ...at hand). Cf ROBERT J. FLANAGAN, THE PERILOUS LIFE OF SYMPHONY ORCHESTRAS: ARTISTIC TRIUMPHS AND ECONOMIC CHALLENGES (2012). (12.) 416 P.3d 1 (Cal. (13.) Id. at 40. (14.) See generally Memorandum from DoorDash et al. to David M. Lanier, Sec'y of the Cal. Labor & Workforce Dev. Agency, &......
  • Employee or Independent Contractor? It Depends on Why You're Asking
    • United States
    • Landslide Nbr. 11-5, May 2019
    • May 1, 2019
    ...one of the various factors to be considered in the event of a dispute over copyright ownership and worker classification. n Endnotes 1. 4 Cal. 5th 903 (2018). 2. California’s Industrial Welfare Commission regulates the California wage orders, which provide the wage, hour, and working condit......
  • Free signup to view additional results
1 provisions
  • Independent Contractor Status Under the Fair Labor Standards Act
    • United States
    • Labor Department,Wage And Hour Division
    • Invalid date
    ...the economic reality test in favor of the ABC test adopted by the California Supreme Court in Dynamex Operations West v. Superior Court, 416 P.3d 1 (2018). By contrast, other commenters, such as the American Society of Travel Advisors (ASTA) and National Federation of Independent Business (......