Dueling proposals signal 2019 will be the year of Dynamex

Many legal and political observers have described 2018 as the year of the #MeToo movement, as legislative proposals related to sexual harassment dominated discussion in state houses across the country. And while that topic is likely to be a continued priority in 2019, it is clear that the dominant policy issue in California will focus on the ramifications of the California's Supreme Court's landmark Dynamex decision.

As most California business and employment lawyers are well aware, the hottest issue of the day is continued fallout from the blockbuster decision by the California Supreme Court in the Dynamex case, where the court adopted an entirely new test for determining whether an individual is an employee or an independent contractor. This new legal standard, known as the "ABC test," makes it more difficult for businesses to utilize independent contractors and threatens to upend entire industries in California.

The California Legislature recently convened to open the 2019-20 legislative session and to swear in new members. It also represented the first opportunity for members to introduce new legislation to be considered in 2019. If the first day is any indication, there is one issue that will dominate employment policy discussion in the coming year: Dynamex.

This is not an entirely new issue for the Legislature. Late last session, there was an attempt by the business community to stay application of the Dynamex case and engage in dialogue to come up with a legislative solution to some of the difficulties created by this new standard. However, that effort fizzled when legislative leadership announced there would be no discussion or further action on the matter. But this issue has not gone away.

Perhaps surprising to some, it was actually labor that took the first offensive in the upcoming Dynamex war, as Assemblywoman Lorena Gonzalez announced that she would be introducing legislation sponsored by the California Labor Federation to codify the Dynamex decision. She wasted little time in introducing Assembly Bill 5, a placeholder bill that declares that it is intended to codify Dynamex and "clarify the decision's application in state law."

In media reports, Gonzalez stated that putting the decision into law "offers a quicker resolution than fighting in court for years over its implications for issues like workers' compensation and unemployment insurance." This statement should give California employers pause. Two recent Court of Appeal decisions interpreting Dynamex provided some good news to employers -- the first (Curry v. Equilon Enterprises LLC) held that the new ABC test was inapplicable to joint employer analysis, while the second decision (Garcia v. Border Transportation Group LLC) held that Dynamex was limited to claims arising under the Industrial Welfare Commission Wage Orders, and did not apply to statutory claims or other areas of the law.

The author's statement above indicates that labor may attempt not only to codify Dynamex, but may attempt to nullify these recent appellate court decisions by extending the ABC test to other areas of California employment law.

Moreover, the introduction of AB 5 can also be seen as a territorial signal by labor and the plaintiffs' bar. Many employer groups and industries may attempt to forge their own path to legislative relief from Dynamex, and the state capitol is abuzz with rumors and activity related to negotiations already underway. In this respect, AB 5 can also be seen as an attempt by labor to control the discussion on their own terms.

But the business community is not likely to merely stand on the sidelines. The first day of session also saw the introduction of the first legislative proposal to provide Dynamex relief to the business community -- Assembly Bill 71 by Assemblywoman Melissa Melendez. AB 71 would take us back to life before Dynamex by declaring that, for purposes of state law, the determination of whether someone is an employee or an independent contractor shall be based on the multifactor Borello test that applied before the California Supreme Court adopted the new ABC test.

Assemblywoman Melendez is no newcomer to this issue, either. At the end of the legislative session last August, Melendez introduced a resolution urging Gov. Jerru Brown to call a special session of the Legislature to suspend the Dynamex decision and look for an alternative solution for businesses and workers alike. That resolution was never heard.

The new year is likely to be busy on the labor and employment front in Sacramento, as a new governor is put to the test on a whole host of thorny employment policy issues -- from mandatory arbitration to further efforts to address sexual harassment in the workplace. However, Gov.-elect Gavin Newsom's biggest test may be how he navigates the controversial debate around Dynamex.

His predecessor, Brown, liked to describe his legislative philosophy as one of balance, where he strove to "paddle right, paddle left." It will be interesting to see how Newsom weighs in on this issue, if at all, and influence the legislative debate.

At the end of the day, the question for California employers will be whether the :egislature provides any meaningful relief, or does further harm by codifying and expanding an already-difficult new standard.