As the legal landscape continues to evolve in terms of labor and employment, the Los Angeles Business Journal once again turned to some of the leading employment attorneys and experts in the region to get their assessments regarding the current state of labor legislation, the new rules of hiring and firing, and the various trends that they have been observing, and in some cases, driving. Below is a series of questions the Business Journal posed to these experts and the unique responses they provided – offering a glimpse into the state of business employment in 2018 – from the perspectives of those in the trenches of our region today. Thanks to our superb panel for their expert insights.
What are the most significant new employment laws taking effect –or the most consequential court decisions decided by the California Supreme Court – in 2018?
COLE: The newest and potentially most significant new employment law is the recent clarification on the standard for determining whether workers should be classified as employees or independent contractors. But other laws have serious implications for employers as well, such as the ban on salary history inquiries, the prohibition on asking applicants about their criminal conviction history before a conditional offer of employment is made, and the prohibition on immigration enforcement agents entering workplaces without a warrant. The new Parental Leave Act is another significant change in 2018, which requires employers with 20 or more employees within a 75-mile radius of the worksite to provide up to 12 weeks of unpaid leave in a 12-month period for the care of a new child. This change is expected to broaden existing family leave legislation to an additional 6 percent of California employers and 2.7 million employees.
ALLDERDICE: In a surprising decision issued on April 30, 2018 by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court, the Court established a new legal test for determining employee versus independent contractor status under California Industrial Welfare Commission (IWC) Wage Orders that apply to most businesses operating in this state. The Court first adopted the test announced in its 2010 decision, Martinez v. Combs, that is, whether the hiring entity had “suffered or permitted” the individual to work, and then the Court decided that independent contractors must ultimately meet what is commonly referred to as the “ABC” test. The “ABC” test requires satisfaction of each of the following elements for a worker to be considered a contractor rather than an employee: “(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” The Court held that this standard was not limited to a “joint employer” relationship, such as the relationship at issue in Martinez, but rather that it could “cover a variety of entities that have a relationship with a workers’ primary employer, for example, a larger business that contracts out some of its operations to a subcontractor but retains substantial control over the work.” In establishing this new test, the Court rejected the longstanding multifactor test that was announced in its 1989 decision, S.G. Borello & Sons, Inc. v. Department of Industrial Relations, which comprises of a primary “right-to-control” test and various secondary factors. The Court noted, however, that for claims arising under other provisions of the Labor Code that do not involve Wage Orders, such as Labor Code section 2802 requiring reimbursement of business expenses, Borello might still be applied as the governing standard. The Court has extended the period of time in which it may decide to rehear the case, at least retroactivity grounds, until July 27, 2018. California businesses that use the independent contractor business model, and not just for easily recognizable independent trades such as plumbers or electricians, are impacted by this decision. Key questions to be addressed include whether the contractor model is still viable for the business and how if at all contractual relationships can properly reflect the parties’ allocation of responsibility for wage and hour violations. This type of allocation was recently upheld by an appellate court in deciding that one joint employer would not be liable for unpaid wages where the contract allocated responsibility between the two parties.