Calif. Test for Who Is an Employee Just Got More Complicated (1)

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By Jon Steingart

California’s labor standards enforcement agency may continue to rely on an older test when it determines whether a worker is an employee or an independent contractor under state law, the Ninth Circuit held, upholding a lower court.

The Sept. 10 decision is a blow for the California Truckers Association, which argued that federal deregulation of the trucking industry pre-empts the state agency from applying a common law test called the Borello test. The Federal Aviation Administration Authorization Act doesn’t block the Borello test because the law only pre-empts state rules that are “related to” prices, routes, or services, the U.S. Court of Appeals for the Ninth Circuit said.

The Borello test doesn’t qualify as “related to” the trucking industry because it broadly applies to a range of contexts and happens to catch trucking in its reach, the Ninth Circuit said, affirming a lower court’s ruling against the association.

The Borello test weighs about a dozen factors for determining whether the relationship between a worker and a business is an employee or a contractor. It’s named after a 1989 state Supreme Court case.

Old Versus New ‘ABC’ Test

In April, the California Supreme Court rejected the Borello standard and switched to a classification test known as an “ABC” test in a decision involving delivery company Dynamex Operations West Inc. The Supreme Court’s Dynamex ruling applies to worker classification under state wage-and-hour law, but it doesn’t affect how the Division of Labor Standards Enforcement administers the law.

The Ninth Circuit said it isn’t a conflict for the DLSE to use the classification test that the state Supreme Court rejected in part because the ABC test replaced Borello only for some aspects of state wage-and-hour law. “We do not believe Dynamex has any impact here,” the Ninth Circuit said. “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.”

In California’s version of the ABC test, a company that wants to demonstrate independent contractor status must show: (A) the worker has freedom from control over how to perform the service, (B) the service is outside the business’s normal variety, and (C) the worker is engaged in an independently established role. Other states use an ABC test for a variety of workplace law purposes, such as unemployment insurance and workers’ compensation.

Cal. Trucking Ass’n v. Su, 2018 BL 324831, 9th Cir., No. 17-55133, dismissal affirmed 9/10/18.

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