Dynamex echoes Supreme Court principles decided almost 50 years ago

When the California Supreme Court introduced the "ABC test" for independent contractors in its Dynamex Operations West v. Superior Court, 4 Cal. 5th 903 (2019), decision, it did so despite the fact that the California Legislature had never adopted that standard. The Legislature showed its support of the decision, however, by recently codifying the ABC test as part of the Labor Code. Some have suggested this is the "reverse" of how judicial review is supposed to work. They say the court overstepped its bounds by adopting a "new standard" not previously approved by the Legislature.

One response to this criticism is that the ABC test is not in fact a new standard but an expression of an existing standard that has been part of California since the early 1900s. Specifically, the California wage orders set forth three alternative definitions of what it is to employ someone and the Supreme Court chose the ABC test as the best expression for one of those definitions: "to suffer or permit to work."

But perhaps the more important response to the criticism that the court exceeded its authority is that the California Supreme Court's foremost interpretive principle is Legislative intent and effectuating that intent is always within the Court's authority -- especially on subjects of broad societal importance.

Numerous times in the Dynamex decision, the court references the Legislative intent behind the wage orders and the importance of "deference to the purposes and intended reach of the remedial statute at issue." After reviewing the history and context of the wage orders, the court concluded that "[t]he basic objective of wage and hour legislation and wage orders is to ensure that ... workers are provided at least the minimal wages and working conditions that are necessary to enable them to obtain a subsistence standard of living and to protect the workers' health and welfare."

Recognizing a contemporary business environment where the use of independent contractor status has been abused to deny workers the protections the Legislature intended to provide, the court committed itself to give real meaning to the broad "suffer or permit to work" standard for employment, even though its literal application was not useful -- since it is arguably too broad. Thus, the court adopted the ABC test since it (1) places the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order's coverage and (2) requires the hiring entity, to meet this burden, to establish each of the three factors embodied in the test.

The court's adoption of the ABC test -- and the Legislature's subsequent codification of it -- has caused great consternation in the business community with many predictions of disaster (and worse).

Perhaps it is reassuring to recall that another California Supreme Court case followed a similar path almost 50 years ago.

Back in 1972, in the case Friends of Mammoth Lakes v. Mono County, the Supreme Court entered the fray over the scope of the California Environmental Quality Act. The law did not specifically define "projects" and, up until that point, the law was only applied to government-initiated actions. However, an organization called Friends of Mammoth Lakes insisted that CEQA should apply to private construction projects, too -- which one commentator called "an enormous extension of the act."

Like in the Dynamex decision, the Mammoth Lakes court began by framing the issue in its historical context. The court discussed the long history of environmentalism in the law, quoting Justice Oliver Wendel Holmes Jr. in a 1930s U.S. Supreme Court decision, that a river is "more than just an amenity, it is a treasure."

Then, like in Dynamex, the Supreme Court turned to the Legislature's intent behind CEQA, which it found to be a broad desire to protect the environment. The court therefore established what some commentators refer to as the "Friends of Mammoth Interpretive Principle" -- CEQA shall be interpreted to give "the fullest possible protection to the environment within the reasonable scope of the statutory language."

Similar to the Dynamex court's rejection of a literal interpretation of "suffer or permit," the Mammoth Lakes court did not consider the absence of reference to private projects to be a limitation on CEQA's scope. The court said: "Once a particular legislative intent has been ascertained, it must be given effect even though it may not be consistent with the strict letter of the statute."

After the court issued its decision, the Legislature quickly codified the new holding. It was official -- CEQA applied to private projects as well as public projects.

Chaos and disaster was predicted. Instead, California is a little greener today. 

Kevin argued Dynamex on behalf of the successful plaintiffs in the state Supreme Court.