Appealing Labor Commissioner Decisions – A Cautionary Tale

Gbolahan Sarumi probably thought it was a good idea to appeal the Labor Commissioner decision. He obviously believed the employee was not entitled to the money awarded, or at least that Gbolahan was not responsible for the payment. He filed his appeal to Superior Court, and several weeks later filed the required bond. He probably didn’t know that when the appeal was later dismissed–even if it is dismissed through settlement–he would forfeit his right to recover the bond.

In Chavez v. Sarumi, the court had to decide whether a late-filed bond could be returned to the person who posted the bond, or if it had to be turned over to the employee. Employers appealing an adverse Labor Commissioner decision must:

first post an undertaking with the reviewing court in the amount of the order, decision, or award. The undertaking shall consist of an appeal bond issued by a licensed surety or a cash deposit, with the court in the amount of the order, decision, or award.

Labor Code §98.2(b)

Some court clerks refuse to accept the appeal without the bond or cash deposit. Others allow the employer to file the appeal and leave it up to the parties and the court to fight it out. In Chavez v. Sarumi, the court made it clear that:

“…when the appeal is dismissed without a settlement, and the employer fails to pay the amount awarded by the Labor Commissioner within 10 days of dismissal, section 98.2, subdivision (b) expressly provides for forfeiture of the undertaking to the employee; it does not provide for the release of funds to individuals who posted the undertaking on behalf of the employer.”

Citing Tabarrejo v. Superior Court, (2014) 232 Cal.App.4th 849

The exact facts of this case are a bit murky. It seems there was also a corporate defendant at the Labor Commissioner, but since the corporation was suspended it could not participate in the appeal. I’m assuming Gbolahan was a managing agent or director of the corporation . It’s possible the hearing officer allowed the employee to “pierce the corporate veil,” but Gbolahan more likely was held liable under Labor Code section 558.1.

It also seems there may have been a settlement of some sort because the decision talks about a “stipulation” between the parties regarding attorneys’ fees. I suspect the employer agreed to pay the full amount of the award, and possibly some amount of attorneys’ fees, once the employer realized he would be responsible for the employee’s reasonable attorneys’ fees if the employee recovered any amount.

I cannot tell whether the employer was represented when he filed the appeal or when he resolved the case. If he was represented when the appeal was filed, then hopefully the attorney advised Gbolahan about the risks involved in appealing Labor Commissioner decisions.

I don’t know why the “stipulation” between the parties did not address the disposition of the bond. This could have been a critical error. When resolving claims, be sure to resolve all claims, and consider what and how the payment will be made.

Whether you are the employee or the employer, deciding whether to appeal a Labor Commissioner claim requires thinking through all the possible consequences of the appeal. Even if you are confident in your position, a court will not necessarily rule in your favor. Appealing the Labor Commissioner decision can have adverse consequences for the employer and the employee.

If you are considering an appeal from the Labor Commissioner, or if you need assistance with a Labor Commissioner claim, contact the Nuddleman Law Firm, P.C. We are happy to help you defend or prosecute your claim.

Original Article by Robert Nuddleman of the Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

Travel Time is Not Compensable

California Employees Must Be Paid for All “Hours Worked”

California protects workers’ rights to compensation. It has a very broad definition of “hours worked.” It includes any time an employee is suffered or permitted to work and any hours an employee is subject to the employer’s control. An employer usually does not have to pay an employee for the regular commute to and from work. Employers usually have to pay when an employee travels from one site to another. Employers may have to pay employees if the employer requires the employee to run errands or engage in other business before reaching the job site. Does the employer have to pay if the employee commutes in a vehicle while carrying company tools?

In Hernandez v. Pacific Bell Telephone Company Plaintiffs sought compensation for the time they spent traveling in an employer-provided vehicle–loaded with equipment and tools–between their homes and a customer’s residence (the worksite) under an optional and voluntary Home Dispatch Program. The trial court concluded the travel time was not compensable. The Court of Appeal agreed and affirmed, finding:

  1. the Home Dispatch Program was not compulsory; and
  2. simply transporting tools and equipment during commute time was not compensable work where no effort or extra time is required to effectuate the transport.

Travel Time Was Not Subject to Employer’s Control

The plaintiffs argued that the travel time to and from the technician’s home and worksite satisfied the “control test.” Plaintiffs focused on the numerous restrictions placed on technicians under the Home Dispatch Program. Technicians could not use the company vehicle personal matters and only authorized persons could ride in or drive the vehicle. Technicians had to drive directly between home and the worksite; they could not stop along the way to run errands or drop off or pick up children from school or talk on a cell phone while driving. Plaintiffs argued by imposing these restrictions, the employer controlled the commute.

The employer pointed out that the Home Dispatch Program was voluntary. Employees were not required to bring the company vehicle home. Employees could have picked up the vehicle at the company site each day. The court agreed with Pacific Bell:

[Plaintiffs] do not address the cases such as Overton, Alcantar, and Novoa in which the courts found commute time in an employer-provided vehicle is not compensable when the employee is not required to use that transportation. Nor do they address the emphasis in Morillion on the compulsory nature of the transportation by bus or the court’s observation “that employers do not risk paying employees for their travel time merely by providing them transportation. Time employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as `hours worked.'”

Hernandez at p.141.

Plaintiffs also tried to analogize their situation to cases where employees were required to deliver tools or equipment to the job site. The court was not persuaded. While employees were required to bring tools necessary to perform the work, every employee has to do that even if the “tools” consist of a laptop or a hammer. Merely bringing the tools necessary to perform the work does not “suffer or permit” the employee to work.

Deciding which hours are compensable or not can be difficult. Federal and state laws do not always agree, and Labor Commissioner Opinion Letters are unreliable. To correctly analyze whether an employee is entitled to compensation, contact the Nuddleman Law Firm, P.C.

Original Article by Robert Nuddleman of the Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

Independent Contractor Analysis Gets Modified…Again

Further Clarification of the Employee vs. Independent Contractor Question

The distinction between employees and independent contractors is imperative to workers and businesses. Employees enjoy many more protections and benefits than independent contractors and therefore place a bigger legal burden on employers. Last year, in Dynamex, the California Supreme Court made the legal gray area of worker classification less hazy, and a new case, Garcia v. Border Transportation Group, provides further clarity.

Review of the Dynamex “ABC Test”

We covered Dynamex last year, but its importance to workers and businesses warrants a review. The Supreme Court set out a three-part legal standard (the “ABC test”) for independent contractor status. Part A requires independent contractors to be free from control by the contracting business. Part B requires contractors to perform work that is not in the normal scope of the contracting business. Finally, part C requires contractors to have their own independent business. If these qualifications are not met, the worker must be treated as an employee under Industrial Welfare Commission wage orders.

The Impact of Garcia

The ABC test does not apply to all areas of employment law, however. In Garcia, the Court of Appeal carves out important exceptions to this standard. The Dynamex decision only applies to wage orders, not other statutes or regulations. Wage orders require employers to pay the minimum wage, allow certain meal and rest breaks, provide itemized wage statements to employees, and other basic employment requirements. Other laws, such as Workers’ Compensation law to non-wage order claims don’t fall under the Dynamex standard. These statutes typically rely on a standard set in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, which primarily relies on “whether the person to whom the service is rendered has the right to control the manner and means of accomplishing the result desired.”

Correct classification of workers can be make or break for both sides of employment relationships. Whenever a dispute arises, or when developing hiring practices, contact the Nuddleman Law Firm, P.C. to ensure compliance with the law.

Written by J.T. Keane for Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

S.F. Minimum Wage Increases

San Francisco minimum wage increases to $15.59 per hour on July 1, 2019.

San Francisco, like many cities and counties in California, adopted a minimum wage rate higher than California or Federal minimum wage. The minimum wage increased to $15.00 on July 1, 2018, and now will increase each year based on the Consumer Price Index.

The City calculated the July 1, 2019 rate using the process required by S.F. Admin Code Section 12R.4. The Consumer Price Index for urban and clerical workers in the San Francisco area increased 3.934% between 2017 and 2018. The City applied that increase to the current $15.00 minimum wage to find the new July 1, 2019 rate of $15.59. 

Employers must display the San Francisco Minimum Wage Poster informing employees of their rights. Download a PDF of the 8.5″x14″ poster.

For more information, visit www.sfgov.org/olse/mwo. You can also call (415) 554-6292 or email mwo@sfgov.org.

Other cities and counties with minimum wage increases above California and Federal minimum wage include:

  • Belmont
  • Berkeley
  • Cupertino
  • El Cerrito
  • Emeryville
  • Los Altos
  • Los Angeles
  • Los Angeles County
  • Malibu
  • Milpitas
  • Mountain View
  • Oakland
  • Palo Alto
  • Pasadena
  • Redwood City
  • Richmond
  • San Diego
  • San Francisco
  • San Jose
  • San Leandro
  • San Mateo
  • Santa Clara
  • Santa Monica
  • Sunnyvale

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

2019 PFAC Conference

I’ll be speaking at the 2019 PFAC Conference taking place May 1-4 at the Disneyland Resort Hotel in Anaheim. This conference provides a comprehensive educational opportunity for professional fiduciaries as well as pertinent learning for estate and trust attorneys, guardians, conservators and probate administrators. I encourage you to take a look at the schedule located at PFACMeeting.org and consider attending. The conference offers up to 20 CLPF CEs and up to 18 MCLEs (non-specialized).

For more information, contact PFAC at 844.211.3151.

I’ll be speaking at the Early Bird Track (yes, that’s at 7:15 in the morning!) on Thursday, May 2nd. I’ll be discussing Working with Caregivers: Solutions to Common Problems

I’ll cover topics such as:

  • Who is the Employer and Why is it Important?
  • Basic Employment Laws for Caregivers
  • The Right Way to Pay
  • Room and Board
  • Workplace Injuries
  • Simplest Solutions
  • What are the Terms?

I hope to see you there.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Minimum Wage Increases for 2019

Most people know the minimum wage increases in California on January 1st. Employers with 26 or more employees must pay at least $12.00 per hour. Employers with fewer employees must pay at least $11.00 per hour. Other workers must also receive increased pay for the new year.

Minimum Salary for “White Collar” Exemptions

Most employees in California are entitled to overtime pay unless the employees meet one or more exemptions. Most exemptions require the employee to receive a salary equal to two times the state’s minimum wage. Since California’s minimum wage increases on January 1st, so did the minimum salary for most exempt employees.  

Employees covered by the administrative, executive, and/or professional exemptions must receive a salary of at least $49,920 per year if the employer has more than 26 employees. If the employer has 25 or fewer employees, the employees must receive at least $45,760 per year. for employers with 25 or fewer employees. Keep in mind, the salary test is only part of the exemption requirement. The employee must also spend most of his/her time performing exempt work.

Exempt Software Professionals 

Certain software professional may be exempt from California’s overtime requirements if they meet certain qualification. “Software professionals” generally covers many software engineers, programmers, developers, analysts, and others performing software development related work. 

Rather than the typical “Two Times Minimum Wage Salary Requirement” applicable to most exemptions, software workers have a higher minimum salary requirement and can be paid an hourly wage. The DIR increases the minimum payment every year based on the California Consumer Price Index.

Effective January 1, 2019, the new minimum wage increases for an exempt computer software professional from $90,790.07 to $94,603.25 per year (from $7,565.85 to $7,883.62 per month). The minimum hourly rate increases from $43.58 to $45.41. 

As with the white collar exemptions, paying the correct amount is only part of the battle. Employers must also ensure the employee’s duties are appropriate for the computer software professional exemption.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

California Rejects De Minimus Time

California Rejects De Minimus Time

Four minutes a day might seem inconsequential, right? Not to the California Supreme Court. In Troester v.Starbucks Corporation, the Court held that employers are required to compensate employees for short, unrecorded periods of time worked off the clock. Such de minimus time, which can add up to substantial time over weeks, months, or years, must be compensated if it occurs “on a regular basis or as a regular feature of the job.” Tasks such as locking up, shutting down computers, or setting the alarm must be compensated under California law.

Unlike Federal Law, California Does Not Have a De Minimus Exception

California’s stricter, more worker-friendly, employment laws supersede federal statutes like the Federal Labor Standards Act. Federal labor law and Supreme Court precedent carve out exceptions for “de minimus” work by employees. This provides some leeway for businesses to avoid compensation for seemingly inconsequential work. However, California law doesn’t contain a de minimus exception. In fact, California specifically requires compensation “for all hours worked.” That puts a requirement on employers to compensate employees for small fragments of time that easily slip through the cracks in the course of the workday. California employers must comply with California law and the FLSA.

What Does This Case Mean For Employers?

Troester does not require employers to track every fraction of a second. There are many instances of work so minuscule, difficult to track, or irregular that it would be nearly impossible to record and compensate. But wait, isn’t that what de minimus time is? Employers must make every reasonable effort to track and compensate workers’ time. The employer bears the burden of ensuring fair and complete compensation. The Court suggests technological advances, restructuring of time recording practices, or even a time rounding policy to assist employers in meeting their obligation to compensate their workers. The Court reminds employers that the DLSE manual and opinion letters are merely “advisory” opinions, and do not hold the force of law. This case makes it clear, once again, that employers should exercise caution when it comes to paying employee wages.

Original article by JT Keane for the Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Waiting Time Penalty Lesson

When an employee quits without notice, there is a myriad of considerations and consequences for an employer. Finding a replacement and keeping the business running smoothly is at the top of many employers’ minds. However, one of the most urgent tasks for an employer when someone unexpectedly quits should be compensating that employee. No matter how abrupt or disruptive an employee’s resignation is, California law requires compensation for all unpaid wages within 72 hours of resignation. That includes accrued vacation time. If an employer fails to comply, they are required by law to pay “waiting time” penalties, equivalent to the worker’s daily wage, for up to 30 days. A new court case, Nishiki v. Danko Meredith P.C., sheds more light on what specific obligations an employer has when an employee quits.

When Does the Clock Start Ticking for Waiting Time Penalties?

In Nishiki, the employee resigned by email on a Friday night, after the close of business. The Court held that it would be unreasonable and unduly burdensome on the employer to start the statutory 72-hour clock at 6:38 on a Friday night. According to the Court, in the pursuit of justice the law must be interpreted in a reasonable, common sense way that does not allow for unjust applications of the law. Employers don’t have to constantly check their email at all hours of the night or over the weekend to ensure compliance. The 72-hour clock starts when it can be reasonably assumed the employer received the resignation. This leaves a reasonable period for the employer to calculate and pay final wages.

Are Waiting Time Penalties Appropriate for Honest Mistakes?

Oh, what a difference a few dollars can make. In Nishiki, the employer made a clerical error, shortchanging the employee by $80. The employee argued this error, and the delay in correcting the error warranted waiting time penalties. The employer argued the error was not “willful,” and therefore did not owe penalties. The Court held the prolonged delay in correcting that error violated the Labor Code and awarded penalties. Employers should make every effort they can to comply with the law and correct any mistakes or errors as quickly as possible.

Attorney’s Fees Can Vastly Outweigh Wage or Waiting Time Penalty Claim

The Nishiki court awarded $2,250 in waiting time penalties. The court also directed the employer to pay $86,160 in attorneys’ fees. This should serve as a warning for employers and employees alike. Appealing Labor Commissioner decisions or lower court rulings in wage claims can be dangerous. The law discourages frivolous appeals. The appealing party must pay the other side’s attorneys’ fees if the appeal is unsuccessful. Fighting over relatively small amount may not be worth the risk of paying the other side’s fees.

Original article by JT Keane. Edited by Robert E. Nuddleman of the Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Dynamex and the Independent Contractor Landscape

A friend and colleague, Alan Foster, asked me to write an article for his newsletter regarding independent contractors under Dynamex. I’ve seen articles, presentations and blog posts about the dramatic shift in the law regarding independent contractor versus employee tests. I have a slightly different take. The following is my take on the independent contractor landscape.

Dynamex and the Independent Contractor

Many legal professionals and business advisors are writing about the California Supreme Court “dealing a blow” to independent contractors. Different articles claim Dymanex Operations West, Inc. v. Superior Courtmakes it more difficult” for employers to classify workers as independent contractors. Many are calling it a “game changer.” But is it really?

Dynamex, a package delivery company, hired delivery drivers to deliver packages. Although Dynamex initially hired the drivers as employees, in 2004 Dynamex changed the drivers to independent contractors. Dynamex believed it provided drivers sufficient freedom it could safely classify the workers as independent contractors. The delivery drivers filed a class action lawsuit seeking unpaid wages and expenses, claiming they were really employees.

The employees claimed that under Martinez v. Combs (2010) 49 Cal.4th 35, Dynamex was the employer. Dynamex argued that Martinez only applied in the joint-employer situation and that the common law test set out in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 should apply.

In Martinez, the court adopted a very broad definition of employer based on the IWC orders.

“[t]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 permit to work, or

(c) to engage, thereby creating a common law employment relationship.”

Borello and the Independent Contractor

In Borello, decided 21 years before Martinez, the court focused primarily on “whether the person to whom services is rendered has the right to control the manner and means of accomplishing the result desired.” The court also looked at nine other factors:

(1) right to discharge at will, without cause;

(2) whether the one performing the services is engaged in a distinct occupation or business;

(3) the kind of occupation, with reference to whether in the locality the work is usually done under the direction of the principal or by a specialist without supervision;

(4) the skill required in the particular occupation;

(5) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(6) the length of time for which the services are to be performed;

(7) method of payment, whether by the time or by the job;

(8) whether or not the work is part of the regular business of the principal; and

(9) whether or not the parties believe they are creating the relationship of employer-employee.

In a very lengthy (85 pages) opinion, the Dynamex confirmed that Martinez and Borello applied in the independent contractor arena. And the court adopted a new test to determine whether someone was “suffered or permitted” to work. This new test is being called the “ABC test.”

Under the ABC test, a worker is an employee unless the hiring entity establishes:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Is This Really a New Test for the Independent Contractor?

Since this is a new test, that means this is a “game changer,” right? Not necessarily. Anyone who has gone through an EDD audit is familiar with the ABC test already. The Employment Development Department has a very useful, although not employer-friendly, test for determining whether someone is an independent contractor. The questions in the DE-38 contain the same factors that make up the ABC test.

Under the DE-38, if the employer answers “yes” to the first three questions, “it is a strong indication that the worker is an employee.” If the employer answers “no” to the next three questions, this “indicates that the individual is not in a business for himself or herself and would, therefore, normally be an employee.” Answering “yes” to the final seven questions on the DE-38 means there is a “greater the likelihood the worker is performing services as an employee.”

So, how does the ABC Test compare to the DE-38? This chart shows the ABC test elements line up directly with the DE-38 test:

ABC Test DE-38
(B) that the worker performs work that is outside the usual course of the hiring entity’s business 3. Is the work being performed part of your regular business?

 

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity 4. Does the worker have a separately established business?
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact 5. Is the worker free to make business decisions which affect his or her ability to profit from the work?

One aspect of the ABC test arguably not in the DE-38 is that the hiring entity must establish each of the three factors in the ABC test. The DE-38 uses phrases such as “strong indication” and “normally,” allowing more leeway than the more definitive ABC test.

The ABC test is less a “new” independent contractor test, and more an application of an existing test that many employers ignored. I have been advising my clients against hiring workers as independent contractors unless the workers have their own established business and the workers are performing work not part of the company’s normal business. Dynamex confirms the conservative approach is the right approach, particularly in California.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

Labor Commissioner Audits Can Be Expensive

Labor Commissioner audits can be time consuming and expensive. Just ask Kome Japanese Seafood & Buffet, Burma Ruby Burmese Cuisine, and Rangoon Ruby Burmese Cuisine. The restaurants and their owners are facing a hefty bill after their audits.

Expensive Labor Commissioner Audits

California’s Department of Industrial Relations announced the Labor Commissioner cited seven Bay Area restaurants more than $10 million for “wage theft violations.” The restaurants included Kome Japanese Seafood & Buffet, Burma Ruby Burmese Cuisine, and Rangoon Ruby Burmese Cuisine.

The Labor Commissioner’s Office launched the investigation after receiving complaints from workers who reported wage theft to the Asian Law Caucus. The Asian Law Caucus also represented many of the workers who cooperated in the investigation.

The wage theft violations and civil penalties cited in the Labor Commissioner Audits include:

  • Failure to pay minimum wage,
  • Overtime
  • Split shift premiums,
  • Illegal counting of tips received as part of the minimum hourly wage,
  • Waiting time penalties, and
  • Pay stub violations.

Many of the overtime violations resulted from employees paid a salary who worked 50 or more hours each week.

Labor Commissioner Audits Include Individual Corporate Owners

The citations are against the corporations and LLCs as well as the owners and members of the companies. Being incorporated does not prevent personal liability for wage theft claims. Labor Code section 558.1 provides:

Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.

Other Labor Code sections also allow the Labor Commissioner to cite individual owners.

David Tai Leung, Wendy Lai Ip, Jun Zheng, Gang Zhou, Bai Dong Zhang and Tiffany Leung, owners of the corporations Kome Japanese Seafood Buffet, Inc. and Koshi Food Service, Inc., are ordered to pay the 133 workers at Kome Buffet $4,381,461 in unpaid wages, premiums and liquidated damages, as well as civil penalties of $780,400.

Max Lee and John Lee, owners of Rangoon Ruby Investment LLC and Burma Ruby Investment LLC, have been ordered to pay their 298 workers $4,394,118 for unpaid wages, premiums, liquidated damages and itemized wage statement violations, and civil penalties of $574,150

The press release did not indicate whether the restaurants will appeal the citations, or how much the Labor Commissioner will actually collect.

I represent employers in Labor Commissioner audits. The audits can be time-consuming and result in serious assessments. Seemingly small mistakes can have serious consequences, and the appeal rights are somewhat limited. Employers receiving notice of an audit should speak with counsel as soon as possible. Properly preparing for an audit can reduce the exposure.

The best way to prevent an audit, or at least make it through an audit unscathed, is to review your policies with a knowledgeable attorney before a problem arises. If you have a question about your wages or employment practices, contact the Nuddleman Law Firm, P.C.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.