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”