California Court of Appeal Rejects Dynamex’s “ABC” Test for Independent Contractors for Claims That Do Not Arise Under a Wage Order
In April 2018, we wrote about the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court, which had clarified the standard for determining whether workers in California should be classified as employees or as independent contractors for purposes of the wage orders adopted by California’s Industrial Welfare Commission (“IWC”).
In Dynamex, the Court adopted the “ABC” test that has been used in some other jurisdictions. Because Dynamex had adopted the “ABC” test for claims arising under IWC wage orders, there was some uncertainty after Dynamex regarding whether the new test would apply to claims that are not brought under a wage order. The Dynamex Court did not consider or express a view about non-wage-order claims.
On October 22, 2018, the California Court of Appeal addressed that issue in Garcia v. Border Transportation Group, LLC, holding that Dynamex’s “ABC” test does not apply to claims not arising under a wage order. The Garcia Court held that the widely used Borello standard applies to non-wage-order claims for determining whether workers are employees or independent contractors.
Although many wage-hour claims do arise under an IWC wage order, a number do not. For example, certain claims for expense reimbursement under Labor Code section 2820, claims for wage statement violations under section 226, and claims for waiting time penalties under section 203 for an alleged failure to pay all wages due at the end of employment arise under the Labor Code only; there are no equivalent claims under any IWC wage order.
Following Garcia, entities doing business in California that have had actions filed against them alleging independent contractor misclassification based on Dynamex now have authority to argue that a number of claims should be dismissed.