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Dynamex Operations W. v. Superior Court

Supreme Court of California

April 30, 2018, Filed

Civil No. S222732

Opinion

 [***5]  [**4]   CANTIL-SAKAUYE, C. J.—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. 3 On the one  [**5]  hand, if [*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 workers' compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours, and working [****820]  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  [***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. 4

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 [*914]  wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees. 5

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4 Cal. 5th 903 *; 416 P.3d 1 **; 232 Cal. Rptr. 3d 1 ***; 83 Cal. Comp. Cases 817 ****; 2018 Cal. LEXIS 3152; 168 Lab. Cas. (CCH) P61,859; 2018 WL 1999120

DYNAMEX OPERATIONS WEST, INC., Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; CHARLES LEE et al., Real Parties in Interest.

Subsequent History: Petitions For Modification Denied and Petition for Rehearing Denied by Supreme Court June 20, 2018

Reported at Dynamex Operations West, Inc. v. Superior Court, 2018 Cal. LEXIS 3208 (Cal., Apr. 30, 2018)

Modified and rehearing denied by, 06/20/2018

Prior History:  [1] Civil No. B249546—Court of Appeal, Second Appellate District, Division Seven; Los Angeles County Superior Court No. BC332016—Hon. Michael L. Stern, Judge, see Dynamex Operations West, Inc. v. Superior Court, 79 Cal. Comp. Cases 1366 (2014)

Dynamex Operations West, Inc. v. Superior Court, 230 Cal. App. 4th 718, 179 Cal. Rptr. 3d 69, 2014 Cal. App. LEXIS 921 (Cal. App. 2d Dist., Oct. 15, 2014)

Disposition: Appeal from judgment of the Court of Appeal, Second Appellate District, Division Seven. Judgment affirmed.

CORE TERMS

independent contractor, wage order, drivers, employees, hiring, purposes, entity, trial court, wages, customers, delivery, employment relationship, common law, working conditions, merchants, definitions, decisions, factors, classified, alternative definition, harvest, class certification, impose obligation, delivery service, details, joint employer, occupation, cases, individual worker, DLSE

Business & Corporate Compliance, Wage & Hour Laws, Administrative Proceedings, Rulemaking Authority, Labor & Employment Law, Employment Relationships, Independent Contractors, Scope & Definitions, Definition of Employ, Administrative Law, Judicial Review, Standards of Review, Deference to Agency Statutory Interpretation, Labor & Employment Law, Scope & Definitions, Governments, Legislation, Interpretation, Civil Procedure, Class Actions, Prerequisites for Class Action, Commonality, Remedies, Class Actions