Appellate court ruling sides with worker who accuses employer of misclassification

An appellate court has undone a summary judgment in favor of a taxi company accused of misclassifying a driver, citing a landmark state Supreme Court decision that established an employee-presumptive test.

In the decision overturning the summary judgment, the 4th District Court of Appeal panel wrote that the defendant company failed the third prong in the "ABC" test laid down in Dynamex Operations West Inc. v. Superior Court of Los Angeles County. Defense attorneys have called the test impossible to satisfy since its codification, while plaintiffs' advocates say it protects employees against wage theft through misclassification.

The third prong, which lies at the center of the Monday decision in Garcia v. Border Transportation Group LLC, 2018 DJDAR 10354, states that to be an independent contractor, a worker must have an established business separate from the hirer in the same industry.

"Under part C of the 'ABC' test adopted in Dynamex, defendants had to demonstrate that Garcia "is customarily engaged in an independently established trade, occupation, or business" apart from his work for BTG, not that he was merely capable of such engagement," wrote Justice William S. Dato in the unanimous opinion.

Justices Patricia Guerrero and Judith L. Haller also sat on the panel.

However, the opinion also clarifies that for now, the Dynamex test only applies to claims under wage orders; others still fall under the previous multi-factor standard predicated on employer control called the Borello test.

The plaintiff, Jesus Garcia, was represented by Francisco Aldana of San Diego, while the defendant, Border Transportation Group LLC, was represented by Roger P. Bingham of Wheatley, Bingham & Baker LLP. Neither responded to requests for comment.

Garcia leased a car from Border Transportation for a flat fee and worked as a taxi driver for 12-hour shifts. He stopped working for the company after he was charged a fee for returning a vehicle late. He then sued the company for a number of violations during his time working for them, including numerous wage violations.

His case was thrown out on summary judgment after the court applied the pre-Dynamex standard and determined he was not an employee. However, after Dynamex, the court was forced to reevaluate the case and ruled that he could move forward on claims arising from wage orders.

Attorneys were quick to point out Garcia confirms that Borello still has a place in labor law by confining Dynamex to wage order violations.

"The Garcia case clarifies a few legal issues in the wake of Dynamex. Garcia confirmed that lower courts will continue to apply the Borello test to claims not covered by a wage order," said Ryan Wu of Capstone Law APC.

Kevin Ruf of Glancy Prongay & Murray LLP, who argued in Dynamex on behalf of the original plaintiffs, disagrees with the court's limiting of the "ABC" test's role.

"In my view, this court's decision to limit the scope of the ABC test to only claims explicitly arising from the wage orders is too limiting. I believe the Supreme Court in Dynamex made it clear that the question is broader: Is the claim consistent with the fundamental purpose of the wage order protections?" he said.

"We have to keep in mind that the Supreme Court said the fundamental purpose of the wage order is to enable workers 'to provide at least minimally for themselves and their families and to accord them a modicum of dignity and self-respect,'" Ruf added.

Other attorneys welcome the clarity offered by the decision.

"The court did, I think, reach an important distinction on the question of the applicability of Borello. It affirmed the fact that Borello, which was the normal test before Dynamex, still has a place and the law is still good," said Jason A. Geller of Fisher & Phillips LLP.

David Goldman of Wendel Rosen Black & Dean LLP pointed out that the circumstances of the case make Dynamex even harder to meet. When taxi drivers are permitted in Garcia's municipality, they are tied to a specific provider, making an independent business harder yet to establish.

"Under this particular test, the permit undercuts the argument," he said. "You're probably going to want to settle the case because the writing is on the wall."

Attorneys still agreed that, within the confines of wage order violations, the opinion also elaborates on the final prong of the Dynamex test by making it clear that a worker cannot simply have the freedom to operate an independent business; they actually have to do it. To them, the ruling further demonstrates the significance of Dynamex.

"It's striking that the 4th Appellate District, Division One, which has the reputation of being one of the more conservative appellate courts, ruled in favor of the employees here by confirming that the "C" prong of Dynamex's ABC Test is difficult to meet," said Wu.

"A lot of employers won't be able to show that 'independent contractors' working for them are actually engaged in an 'independent business' under the ABC Test. These businesses will need to change their business model," Wu added.

"If you're engaging contractors, the principal is going to want to make sure this person or company pre-existed before that relationship, and the principal is confident an independently established business predated the relationship," said Geller.

"This case demonstrates how the Dynamex decision is truly a 'game changer.' The application of the ABC test is markedly different than the traditional common law Borello approach and provides much clearer guidance," said Ruf. "Thus, like here, a case that was dismissed under the Borello standard survives summary judgment under the ABC test. That's a big deal."