California Corner: The Employee v. Contractor Saga Continues as Uber and Postmates Face First Defeat in Attempt to Enjoin AB5

Caroline Powell Donelan and Natalie Alameddine

The hopes of California gig economy companies to retain the flexibility to classify workers as independent contractors were dashed this week when a federal district court judge refused to enjoin Assembly Bill 5 (“AB5”), which codifies the “ABC” test for most independent contractor classifications.

Governor Gavin Newsom signed AB5 into law last fall, effecting a seismic change on California’s legal landscape. Effective January 1, 2020, the law makes it nearly impossible for companies to lawfully classify most workers as independent contractors (rather than employees). The bill expands on California Supreme Court’s three-prong “ABC” test from its 2018 Dynamex decision for determining how workers can be classified, which you can read about here. With certain limited statutory exceptions, AB5 provides that, to properly classify a worker as an independent contractor in California, an employer must demonstrate that the worker: (A) is free from the company’s control and direction; (B) performs work outside of the company’s usual course of business; and (C) is customarily engaged in independent work of the same nature as the work performed. There is no balancing, as all three factors must be met. Continue reading “California Corner: The Employee v. Contractor Saga Continues as Uber and Postmates Face First Defeat in Attempt to Enjoin AB5”

Shocker!? Scary New California Employment Laws – Coming to You January 1!

Caroline Powell Donelan and Taylor C. Morosco

California Governor Gavin Newsom went on a bill-signing frenzy earlier this month, enacting 17 new bills into law. Below, we highlight the “Big Five” which will have a certain and critical impact on any business with workers in the Golden State.

AB 51 Prohibiting Mandatory Arbitration. California’s battle against arbitration wages on! For agreements “entered into, modified, or extended” on or after January 1, 2020, AB 51  prohibits employers from requiring current employees or applicants to “waive any right, forum, or procedure for a violation” of the Fair Employment and Housing Act or the California Labor Code. This necessarily means that an employer will not be permitted to require applicants or employees to consent to mandatory arbitration as a condition of employment. Notably, employees may still voluntarily consent to arbitration, and AB 51 does not apply to “postdispute” settlement agreements or “negotiated” severance agreements, terms that beg for clarification. AB 51 prohibits retaliation against individuals who refuse to consent to such agreements and even authorizes injunctive relief and attorneys’ fees to any plaintiff who proves a violation. There is no doubt that this bill will be challenged under the Federal Arbitration Act (“FAA”), which preempts any state law that “stands as an obstacle” to enforcing arbitration agreements. While the bill contemplates and tries to avoid preemption by expressly stating it is not “intended to invalidate a written arbitration agreement that is otherwise enforceable under the [FAA],” similar attempts by the state have been rejected. Continue reading “Shocker!? Scary New California Employment Laws – Coming to You January 1!”

California Passes AB 5: The Lawful Use of Independent Contractors in California is Drastically Limited

Caroline Powell Donelan and Caitlin I. Sanders

Just last year, the California Supreme Court in Dynamex Operations West v. Superior Court (2018) 4 Cal. 5th 903 (“Dynamex”) abruptly replaced the longstanding test in California for determining whether a worker is an independent contractor (versus an employee) with a more stringent “ABC” test for purposes of the California Industrial Welfare Commission (“IWC”) Wage Orders.

Under the “ABC” test, a worker is presumed to be an employee unless the hiring entity can prove that the worker is (A) free from control; (B) providing services unrelated to the hiring entity’s business; and (C) holding him or herself out as an independent business. More on the landmark decision in Dynamex can be found here.

Last week, California Governor Newsom signed into law Assembly Bill (“AB”) 5, which codifies and expands the “ABC” test set forth in Dynamex, making it even more difficult for employers to properly classify workers as independent contractors in California.

What are the basic provisions of AB 5? Continue reading “California Passes AB 5: The Lawful Use of Independent Contractors in California is Drastically Limited”

Once in a Lifetime? Rare Battle Won for Golden State Employers—but the PAGA War Rages On

Caroline Powell Donelan and Taylor C. Morosco

While talking heads focused on the debates heating up in Houston last week, the California Supreme Court on Thursday put an end to a nearly five-year debate regarding the permissible scope of recovery and arbitrability under California’s Private Attorneys General Act (“PAGA”), a statute that has left employers in the Golden State scratching their heads for over a decade.

On September 12, 2019, California’s highest court held that “underpaid wages” are not recoverable under PAGA. The decision, ZB, N.A. v. Superior Court (“Lawson”), marks big changes in the wild-west of PAGA litigation, yet many key questions remain unanswered.

You May Ask Yourself, Well, How Did I Get Here?

Ahh, PAGA. Where to begin? For the last 15 years, PAGA has allowed private citizens to step into the shoes of the Labor Commissioner, essentially turning “aggrieved” employees into bounty-hunters for the State’s Labor and Workforce Development Agency (“LWDA”). Specifically, PAGA litigants are authorized to recover civil penalties on behalf of the State for certain Labor Code violations, which would otherwise be recoverable only by the Labor Commissioner. If successful, employees receive a 25 percent share of civil penalties recovered, with the remaining 75 percent going to the LWDA. And one other thing, PAGA allows for the recovery of attorneys’ fees and costs, which are often exponentially larger than the underlying civil penalties and statutory damages recovered—leaving no surprise as to why PAGA has become such a popular vehicle for plaintiffs’ attorneys. Continue readingOnce in a Lifetime? Rare Battle Won for Golden State Employers—but the PAGA War Rages On”