No Question of Timing – Dynamex Applies Retroactively, Ninth Circuit Court of Appeals Says

It makes a big difference whether a worker is an employee or an independent contractor. Employees benefit from the protections of labor, employment, and other valuable statutory protections that do not cover independent contractors.

The breadth of “employee” status has been clarified under developing California law. Last year, the California Supreme Court decided the landmark case Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, about which Bryan Schwartz Law has written previously. This case established the “ABC” test for determining whether a worker is an employee or an independent contractor, with a presumption that a worker is an employee, i.e., with the burden on putative employers to demonstrate that workers are independent contractors. Id. at 957. To meet this burden, the putative employer must show (a) that the worker is free from the control and direction of the hiring entity, (b) the worker performs work outside the usual scope of the entity’s business, and (c) the worker is engaged in an independently established trade, occupation, or business. Id. at 964. Failing to demonstrate any one of these elements is sufficient to show an employee-employer relationship. Id. at 964.

But does the Dynamex test apply retroactively to cases arising before it was decided? It does, according to the decision in Vazquez v. Jan-Pro Franchising International, Inc., which the Ninth Circuit Court of Appeals issued on May 2, 2019. Workers for international janitorial giant Jan-Pro filed this case in 2008, alleging Jan-Pro implements a business model to misclassify workers as independent contractors and escape the company’s minimum wage and overtime responsibilities. Jan-Pro contracts with franchises of “master owners,” which in turn contracts with “unit franchisees.” Master owners themselves do not clean but instead engage in various managerial or administrative duties; unit franchisees clean. The plaintiffs, janitorial workers at unit franchisees, alleged they were misclassified as independent contractors.

The case had a tortured procedural history with over a decade of litigation, dispositive decisions, and appeals in federal and state courts in California, Georgia, and Massachusetts. In the Ninth Circuit, Jan-Pro argued that a judicial ruling in Georgia had already decided the issue, thereby conclusively resolving the Ninth Circuit case as well under the doctrine of res judicata. Regardless, Jan-Pro argued, the Dynamex decision should not apply retroactively to cases arising before it was decided in 2018.

The Ninth Circuit rejected both arguments. The Court disposed of the res judicata arguments on grounds specific to the procedural history of the litigation. In brief, the Court held that the Massachusetts plaintiff was not in privity with the California plaintiffs, nor did he legally represent their interests—the California plaintiffs could not lose their day in court simply because of a similar case involving someone else on the east coast.

Next the Court addressed the important issue at stake for California workers: whether the Dynamex decision applied retroactively. The answer was a resounding “yes.” California’s judicial decisions traditionally apply retroactively, even when overruling past precedent. The Court adhered to this traditional rule, drawing further support from other California courts’ retroactive application of the Dynamex decision and the California Supreme Court’s summary denial of a petition to modify Dynamex to clarify that it was prospective only. Notably, despite its considerable impact on the lives of workers and employment law practice, the Dynamex decision did not create new law but instead hewed close to the fundamental purpose of existing California law. Because the lower court had dismissed the workers’ claims on summary judgment before Dynamex was decided, the Ninth Circuit remanded the case for a decision in light of Dynamex.

If you believe you are misclassified as an independent contractor and should enjoy the same rights as an employee, contact Bryan Schwartz Law.

On-Call Scheduling Practice Ruled a Violation of Employees’ Rights

On February 4, 2019, the Court of Appeals for California’s Second District ruled in favor of retail employees in an important decision about on-call work time in Ward v. Tilly’s, Inc., Case No. B280151. This decision is a major victory for on-call employees who have to set aside time for shifts they might not get to work. You can find the opinion here.

The employer, Tilly’s, a clothing and accessories retailer, required their employees to call two hours ahead of some shifts to find out if they were actually needed. These on-call shifts had concrete start and end times, and Tilly’s instructed its employees to plan as if they were definitely going to work the shifts. Some on-call shifts were scheduled immediately after an employee’s regular shift, in which case the employee would learn whether she was needed during her regular shift. Although Tilly’s could reprimand or even fire employees for failing to call in before their on-call shifts, they were not paid for any on-call shifts they did not work, nor were they paid for the two hours between calling in and the start of the on-call shift.

A scheduling scheme like Tilly’s puts workers, especially low-wage workers, in a tough spot. An employee scheduled for a potential shift has to plan her day as if she will work the shift, despite not having the guarantee of compensation. This stressful arrangement means setting up child care or care for aging relatives, pursuing additional employment, rearranging health care appointments and education schedules, or foregoing sleep, personal hygiene, or leisure, even though an employee may not know whether she will be called in to work until just two hours before her potential shift. In essence, Tilly’s required their employees to block out their time for work without the assurance of being paid.

The plaintiff filed a putative class action suit against Tilly’s, challenging this scheduling practice. Tilly’s argued that the lawsuit did not state a cause of action—that everything the employee said Tilly’s did, in Tilly’s view, was legal. The Superior Court in Los Angeles agreed and threw out the case.

The Court of Appeals reversed, ruling that Tilly’s on-call scheduling scheme violated the law, specifically Wage Order 7 (Spanish) (Chinese). The Industrial Welfare Commission has issued 17 Wage Orders, including Wage Order 7, to regulate wages and work conditions for California workers. Wage Order 7 requires employers to pay employees for “[e]ach workday an employee is required to report for work, but is not put to work . . . .” Wage Order 7-2001 (8 Cal. Code Regs § 11070). Tilly’s argued that the phrase “report to work” requires an employee’s physical presence at the workplace when a shift starts.

Not so, said the Court of Appeals. The Court of Appeals drew attention to the unbalanced burdens that Tilly’s on-call scheduling scheme placed on its workers. The scheme benefited Tilly’s immensely: “This permits employers to keep their labors costs low when business is slow, while having workers at the ready when business picks up. It thus creates no incentive for employers to competently anticipate their labor needs and to schedule accordingly.” Ward, Case No. B280151, at *22. In contrast, the scheme “impose[d] tremendous costs on employees. . . . [O]n-call shifts significantly limit employees’ ability to earn income, pursue an education, care for dependent family members, and enjoy recreation time.” Id. at *22. These burdens affect employees not just during their on-call potential shifts, but for the two hours between the phone call and the shift itself. Id. at 22-23. The Court of Appeals held that Wage Order 7 was designed to prevent unfair scheduling practices such as this, and determined that the phrase “report for work” included the act of calling in. Id. at 23, 25. The wage orders covering workers in other industries use the phrase “report to work” in the same way as Wage Order 7.

In conclusion, the Court of Appeals pronounced that “if the employer directs employees to present themselves for work by logging on to a computer remotely, or by appearing at a client’s job site, or by setting out on a trucking route, then the employee ‘reports for work’ by doing those things. And if . . . the employer directs employees to present themselves for work by telephoning the store two hours prior to the start of a shift, then the reporting time requirement is triggered by the telephonic contact.” Id. at 25-26. This conclusion is similar to a California Supreme Court decision that an employer cannot require its employees to keep their pagers and phones on to remain on-call during their rest breaks, which Bryan Schwartz has blogged about before. See Augustus v. ABM Sec. Servs., Inc., 2 Cal.5th 257, 269 (2017).

If your employer has asked you to call in before scheduled shifts to determine if you are needed to work, please contact Bryan Schwartz Law today. Click here for more information about Bryan Schwartz Law.

California Supreme Court Clarifies that Most Employers Must Provide Employees with Seats for Tasks that May Reasonably Performed While Sitting

On Monday, the California Supreme Court provided much-needed guidance on a little-known state regulation that requires employers to provide employees with “suitable seats” when reasonable. The Supreme Court’s opinion in Kilby v. CVS Pharmacy, Inc. clarified that whether an employer must provide a seat depends on the individual tasks the employee regularly performs and whether any of those tasks may reasonably be performed while sitting, not whether the majority of tasks performed by the employee could be performed seated. It further clarified that employees who regularly work standing must be provided with a seat during breaks.

Despite the standing-desk trend amongst office workers, for workers who spend most of their shifts on their feet, sitting down for part of the workday reduces fatigue and promotes overall health. The Supreme Court’s interpretation of the seating requirement thus forces employers to evaluate the physical conditions of their employees’ workspaces through the lens of safety and health.

The U.S. Court of Appeals for the Ninth Circuit had requested guidance from the California Supreme Court to resolve two cases which implicated the seating requirement: one involving cashiers at CVS Pharmacy and another involving tellers at JPMorgan Chase Bank. The requirement is contained within the Industrial Welfare Commission’s wage orders, which regulate wages, hours, and working conditions for various job categories. (It impacts most workers in California, with the exception of those regulated by wage orders covering agricultural, construction, drilling, logging, and mining jobs, which have different seating rules.)

The California Supreme Court first traced the history of the seating provision, which dates to a 1911 law requiring that female employees in the mercantile industry be allowed to sit during breaks. A few years later, the Industrial Welfare Commission incorporated seating requirements for women and children into the various wage orders, including a requirement that garment and laundering workers be permitted to work while sitting. Seating requirements evolved over the following decades, and became applicable to employees regardless of gender in the early 1970s. In its current form, the relevant seating provision states:

14. SEATS

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.

(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

In interpreting the seating requirement, the Court rejected the employers’ position that “the  nature of the work” language calls for a review of all tasks performed by an employee throughout the day to categorize work into “sitting jobs” and “standing jobs.” The Court explained: “There is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.” However, the Court also rejected the employees’ argument that if a single job task could be performed sitting, a seat must be provided.

The Court was instead persuaded by guidance from the Division of Labor Standards Enforcement which cautioned that the all-or-nothing approach obscures what tasks a worker actually performs (and their duration) and ignores the central purpose of the wage orders to provide a minimum level of protection for workers. But the Court also noted that, contrary to the argument advanced by the employees, the reasonableness standard in the provision means that a seat likely need not be provided where seated tasks comprise very little of the workday.

The Court’s standard thus requires an examination of all relevant factors and a balancing of the employee’s need for a seat against the impact on the employer’s business. Relevant considerations would include whether tasks in a given location could be performed sitting, whether sitting would significantly interfere with other standing tasks, and the impact on overall job performance. The Court further explained that the inquiry is an objective one and an employer’s mere preference for standing work is irrelevant.

Finally, the Court explained that sections 14(A) and 14(B) are not mutually exclusive and that both may apply to the same employee during different parts of the workday. For instance, an employee who performs both seated and standing work may be entitled to a seat during breaks in addition to while performing seated tasks.

The Supreme Court’s guidance is significant because employees who suffer violations of the seating requirement may be able to file an action under the Private Attorneys General Act of 2004 (PAGA). PAGA provides a cause of action for workers to enforce Labor Code violations in court on behalf of themselves and other aggrieved employees. In the context of the seating requirement, employers who fail to provide seats when it is reasonable to do so could be on the hook for penalties starting at $100 for each aggrieved employee per pay period. See Home Depot U.S.A., Inc. v. Superior Court (2010) 191 Cal.App.4th 210, 218; see also Cal. Labor Code § 2699(f)(2). Given that risk, many employers will likely find it more cost-effective to simply buy more chairs.

If you believe that your employer has unreasonably denied you access to seating while performing work or during breaks, please contact Bryan Schwartz Law.