Independent Contractor vs. Employee: AB 5 Makes Dynamex California Law

On September 18, 2019, Governor Gavin Newsom signed California Assembly Bill 5 (AB 5) into law –expanding the California Supreme Court’s decision in the Dynamex Operations West, Inc. v. Superior Court (Dynamex) and codifying the “ABC test” for determining if a worker may be classified as an independent contractor, instead of an employee.

In Dynamex, the California Supreme Court revisited whether the factors from its prior decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (Borello) were the best way to determine employment for purposes of claims under the California Wage Orders. The Court concluded that Borello was not the proper test, ruling that the ABC test should be used to determine whether a worker should be classified as an employee or an independent contractor.

Under the ABC test, a worker is presumed to be an employee unless the company proves that the worker:

(A) Is free from the control and direction of the company in performing work, both practically and in the contractual agreement between the parties; and

(B) Performs work that is outside the usual course of the company’s business; and

(C) Is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.

To satisfy the ABC test and legally classify a worker as an independent contractor, the employer must prove that a worker is free from the company’s control, performs work outside the company’s primary business, and is regularly engaged in the trade the worker is hired for, independent of work for the employer. All three parts of the ABC test must be satisfied before a worker can properly be considered an independent contractor.

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Labor Code 226.2: Are Piece-Rate Workers Compensated for Rest Periods?

What is California Labor Code 226.2?

California Labor Code section 226.2 says that workers who are paid on a piece-rate basis must be paid separately for their rest periods and “other nonproductive time.” Section 226.2 defines other nonproductive time as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” For workers in California who are paid on a piece-rate basis this means that they must be paid at least the minimum wage for all hours worked, and for their rest period time, in addition to their piece-rate compensation. This law was passed following two appellate court decisions that interpreted California Wage Orders to require that piece-rate workers be compensated for all hours worked, which includes the time they are not performing work for piece-rate wages. Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 40 (2013) (piece-rate auto-repair workers “entitled to separate hourly compensation for time spent waiting for repair work or performing other nonrepair tasks directed by the employer during their workshifts”); Bluford v. Safeway, Inc., 216 Cal. App. 4th 864, 872 (2013) (under California law that employees must be compensated for each hour worked, “rest periods must be separately compensated in a piece-rate system”). Continue reading “Labor Code 226.2: Are Piece-Rate Workers Compensated for Rest Periods?”


Supreme Court: Service Advisors are Exempt under the FLSA

Reversing the Ninth Circuit Court of Appeals, the U.S. Supreme Court ruled that “service advisors” employed by car dealerships are exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”). Encino Motorcars, LLC v. Navarro, No. 16-1362, 2018 WL 1568025 (U.S. Apr. 2, 2018) (“Encino Motorcars II”).

The FLSA requires employers to pay employees overtime compensation if they work more than 40 hours a week, unless the employee is exempt. One of the exemptions in section 213 of the FLSA covers “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements….” 28 U.S.C. § 213(b)(10)(A). Continue reading “Supreme Court: Service Advisors are Exempt under the FLSA”


Recent Arbitration Decisions: Wins for Employees and Employers

A Win for Employees:

In Sprunk v. Prisma LLC, 14 Cal. App. 5th 785 (2017), the court confirmed that an employer’s right to compel arbitration against its employees is not absolute. In a detailed decision from the Second Appellate District Court of Appeal, the court found that an employer had waived the right to compel arbitration. The employer in that case filed a motion to compel arbitration against the individual named plaintiff. Fearing that the trial court would order the parties to arbitrate on a class basis, the employer withdrew its motion to compel.  The parties then proceeded to litigate the case for nearly three years. The court granted the employee’s motion for class certification, and soon thereafter the employer made a new motion to compel arbitration against all of the class members who had signed arbitration agreements. The trial judge denied the employer’s motion, finding that it had waived its right to compel arbitration based upon its delay in seeking arbitration of the employee’s individual claims and that the delay was both unreasonable and prejudicial.

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California’s “Day of Rest” Requirements

In an important decision for California employees and employers, the California Supreme Court issued its opinion in Mendoza v. Nordstrom, 2 Cal. 5th 1074, 393 P.3d 375 (2017) clarifying the Labor Code’s “day of rest” requirements.  The Court was addressing questions posed by the Ninth Circuit Court of Appeals regarding how to interpret California Labor Code sections 551 and 552. See Mendoza v. Nordstrom, Inc., 778 F.3d 834 (9th Cir. 2015). Labor Code section 551 states that “every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.” Labor Code section 552 prohibits employers from “causing their employees to work more than six days in seven.”  However, Labor Code section 556 provides that employers do not have to provide a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”

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Rest Periods Must be Separately Compensated for Commissioned Employees

In Vaquero v. Stoneledge Furniture LLC (Feb. 28, 2017, B269657) __ Cal.App.4th __ (“Slip Op.”), the Court of Appeal explained that an employer’s obligation to separately compensate employees for rest periods extends to employees who are paid on a commission basis. This decision is in accord with other Court of Appeal decisions that require employers to separately compensate rest periods for employees who are paid on a piece-rate basis. (See Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864; Gonzalez v. Downtown L.A. Motors, LP (2013) 215 Cal.App.4th 36; see also Labor Code § 226.2.)

In Vaquero, the court analyzed IWC Wage Order No. 7, which applies to the Mercantile Industry, including retail and wholesale salespeople. Section 12 of Wage Order No. 7 says that employees must receive 10 minutes of rest time for every four hours worked, or major fraction thereof, which must be counted as hours worked for which there shall be no deduction from wages.

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Rest Period Pay and Overtime Premiums for Piece-Rate Workers

A complicated and developing area of California wage and hour law involves how to calculate wages and premium pay for piece-rate workers. In this post, we will explain the calculations for rest period wages and overtime premiums for piece-rate workers.

Many California workers are compensated on what is known as a “piece-rate” basis. Piece-rate means that a worker’s pay is based on a specific amount paid for completing a particular task or making a particular piece of goods. This could include truck drivers who are paid based on the number or type of loads delivered, factory workers who are paid based on the number of widgets completed, or construction workers, such as plumbers or electricians, who are paid based on the number of installations they do.

Even though piece-rate workers are not paid by the hour, they are still entitled to the protections provided by the California Labor Code. These protections include overtime premium pay for more than eight hours of work in a day or 40 hours in a week, meal periods before the end of fifth hour of work, separate compensation for required rest periods, and wage statements showing, among other things, the number of pieces completed, the applicable piece rates, and overtime and rest period pay.

But if someone is paid by the piece, how is their hourly wage calculated for the purpose of determining the amount of wages for paid rest periods and overtime premiums?

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Morris v. Ernst & Young -The Ninth Circuit Follows D.R. Horton

In an important decision for workers seeking to join together to enforce their employment rights, the Ninth Circuit Court of Appeals ruled in Morris v. Ernst & Young ( that employers can not impose concerted action waivers in mandatory arbitration agreements. The Ninth Circuit held that employers violate Sections 7 and 8 of the National Labor Relations Act […]


Representative Evidence May Be Used to Prove Class Action Wage Claims

In a case of national importance, the U.S. Supreme Court ruled that workers could use representative or statistical evidence to prove their claims for overtime under the Fair Labor Gear-and-Gavel_blackStandards Act (“FLSA”). Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) (“Tyson Foods”). The case involved workers at a meat-processing plant in Iowa. They claimed that Tyson Foods did not pay them for the time they spent putting on and taking off (“donning and doffing”) protective equipment for their dangerous work, or for the time they spent walking to and from their workstations in the plant. At trial the workers used a report from an industrial relations expert to show the amount of time they spent donning and doffing. The expert had done videotaped observations to find out how long these activities usually took and then averaged the times. The average times were added to each employee’s timesheets to determine which employees worked more than 40 hours per week if their donning and doffing time was taken into account. The trial court accepted this evidence and the jury awarded the workers $2.9 million in unpaid wages.  Continue reading “Representative Evidence May Be Used to Prove Class Action Wage Claims”