FEATUREOF THEMONTH 13 What are some hot issues in California employment law? Practicing in one of the most employeefriendly states, there is never a dull moment when advising my business clients about California employment law. I work on a wide range of employment issues, often on the following repeat matters: (1) independent contractor misclassification claims; (2) protecting my clients from the retroactive application of new California employment law that invalidates how they previously operated; and (3) strategising about how to deal with PAGA claims, including by updating arbitration agreements. What is California’s ABC test, and is it being applied retroactively? In 1989, the California Supreme Court announced that SG Borello & Sons, Inc v Department of Industrial Relations, 48 Cal. 3d 342 (1989) controls whether workers are independent contractors or employees. Under this nine-factor test, no single factor automatically establishes employee status. Indeed, even if multiple factors indicate employee status, a worker can still be deemed an independent contractor. Despite businesses relying on Borello for nearly 30 years to structure their workforces, in Dynamex v Superior Court, 4 Cal. 5th 903 (2018), the California Supreme Court adopted a three-factor test to replace Borello for certain claims. The ABC test significantly expands the scope of employment, because if the hiring entity fails to establish any factor, the worker is deemed an employee. After Dynamex, the ABC test became effective immediately. Businesses thus had to scramble to assess whether their existing independent contractor relationships – even if lawful under Borello – could pass the ABC test. If a hiring entity was unsure whether it could satisfy the ABC test, it had to pivot to an employee model, modify its own business practices, or risk a misclassification lawsuit. The cost of such a lawsuit can be staggering, because misclassifying a worker as an independent contractor gives rise to a litany of derivative claims that may be actionable through class action and PAGA lawsuits, including willful misclassification, unpaid minimum wages and overtime, improper meal and rest breaks, failure to reimburse business expenses, inaccurate wage statements and untimely payment of wages. Willful misclassification alone can give rise to $25,000 in penalties for each worker misclassified as an independent contractor. What’s more, in Vazquez v Jan-Pro Franchising Int’l, Inc, 10 Cal. 5th 944 (2021), the California Supreme Court ruled that the ABC test applies retroactively. Thus, even if hiring entities had properly utilised workers as independent contractors while Borello controlled, the backwards application of Practicing in one of the most employeefriendly states, there is never a dull moment when advising my business clients about California employment law.
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