California Employee Misclassification Dynamex AB5

The classification of a worker as an employee or an independent contractor carries critical legal consequences for the worker.  Under California law, employee misclassification occurs where an employer abusively classifies a worker as an independent contractor, and deprives the worker of employee protections, including minimum wage, overtime, paid sick leave, unemployment insurance, and paid time off.  Further, employers can be vicariously liable for employee torts, whereas a person hiring an independent contractor is generally not vicariously liable for the former’s torts.  Van Arsdale v. Hollinger, 68 Cal. 2d 245 (1968).  Misclassified employees have a claim against their employer and are entitled to recover damages stemming from the misclassification.

Evolution of California Employee Misclassification

In 2018, the California Supreme published Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018), an opinion unveiling widespread change for California workers.  In 2019, the California Legislature passed AB5, which codified these changes by adding Labor Code section 2750.3.  As a result of California’s reforms, workers statewide are presumed employees instead of independent contractors. Further, these legal developments introduced a new test for determining worker classification.

Striving to deter widespread employee misclassification, the California Supreme Court adopted the ABC Test for determining whether a California worker is properly classified as an employee or independent contractor.  Never previously applied in California, the ABC Test presupposes a worker to be an employee, unless the hirer establishes all of the following conditions:

  • The person is free from the control and direction of the hirer in relation to the performance of the work, both under the contract and in fact;
  • The person performs work outside the hirer’s usual business; and,
  • The person is customarily engaged in an independently established trade, occupation, or business that is the same as work performed for the hirer. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 917 (2018); California Labor Code § 2750.3(a).

At the time of its publishing, Dynamex’s ABC Test was considered an express rejection of the longstanding “right to control” test outlined in S.G. Borello & Sons, Inc. v. Department of Indust. Relations, 48 Cal. 3d 341 (1989).  While the ABC’s first prong is reminiscent of Borello’s right to control test, the rest of the test provides greater protection from abusive employee misclassification.  Despite the Dynamex decision’s limited applicability to IWC Wage Order violations, AB5 significantly expands the ABC Test’s reach to all violations of the Labor Code, FEHA and California Ban the Box violations, unemployment insurance, and worker’s compensation.  Today, millions of California employees work with dignity as they are protected from abusive employee misclassification.


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California Misclassified Employees Protected From Employer Abuse

In addition to ABC Test protections, misclassified employees are protected from employer abuse. California employers cannot charge misclassified employees a fee or deduct from compensation for any purpose, including for goods, employer materials, space rentals, services, government licenses, repairs, equipment maintenance, or fines when such deductions would be unlawful if the individual were not misclassified.  California Labor Code § 226.8(a)(2).

California Employer-Employee Relationships Examples

Prior to the Dynamex holding and AB5’s passage, California courts found employer-employee relationships under the following circumstances:

  • Golf course employed caddies paid and directed by individual golfers. Claremont County Club v. Industrial Acci. Com, 174 Cal. 395 (1917);
  • A hospital employed a student nurse despite payment of school credit and not a salary. Anaheim General Hospital v. Workmen’s Comp. App. Bd., 3 Cal. App. 468 (1970);
  • A jockey hired ride one race was an employee. Drillon v. Industrial Accident Comm’n, 17 Cal. 2d 346 (1941);
  • A booking agent was the employer of a high-wire performer. Schaller v. Industrial Accident Comm’n, 11 Cal. 2d 46 (1938);
  • A movie stuntman hired to perform a rodeo stunt during a three-day engagement was an employee.Durae v. Industrial Accident Comm’n, 206 Cal. App. 2d 691 (1962);
  • A cosmetologist working at a beauty shop was an employee. Truesdale v. Workers’ Compensation Appeals Bd., 190 Cal. App. 3d 608 (1987);
  • A newspaper carrier hired to deliver newspapers was an employee. Antelope Valley Press v. Poizner, 162 Cal. App. 4th 839 (2008); and,
  • A taxicab driver was an employee of a taxicab company. Yellow Cab Cooperative, Inc. v. Workers’ Compensation Appeals Bd., 226 Cal. App. 3d 1288 (1991).

Positions Exempt from Dynamex & AB5

Labor Code section 2750.3 and the Dynamex holding do not apply to the following occupations, which California expanded in September 2020:

  • Insurance agents, inspectors, surplus line brokers, and life and disability insurance analysts;
  • Physicians, surgeons, dentists, podiatrists, psychologists, and veterinarian’s licensed by the State of California, when performing professional or medical services to or by a healthcare entity;
  • Licensed lawyers, architects, engineers, private investigators, or accountants;
  • Securities broker-dealers or investment advisors or their agents and representatives who are registered with the SEC or FINRA, or licensed with the State of California;
  • Real estate appraisers;
  • Home inspectors;
  • Translators;
  • A direct sales salesperson;
  • Commercial fishermen working on American vessels (only from January 1, 2020 to January 1, 2023);
  • Fine artist;
  • Freelance writers;
  • Photojournalists;
  • Still photographers;
  • Freelance editors;
  • Newspaper cartoonists;
  • Copy editors;
  • Producers;
  • Data aggregators;
  • Competition judges;
  • Individuals engaged in international exchange visitor programs;
  • Cartographers;
  • Musicians with single-engagement live performances;
  • Recording artists, songwriters, lyricists, composers, and proofers;
  • Recording artist managers;
  • Record producers and directors;
  • Musical engineers, mixers, and musicians creating sound recordings;
  • Vocalists;
  • Independent radio performers;
  • Graphic design;
  • Grant writer;
  • Manufactured housing salespersons;
  • Youth sports coaches;
  • Landscape architects; and,
  • Professional foresters.

Workers in these exempt occupations continued to be governed by S.G. Borelleo & Sons, Inc. v. Department of Indust. Relations, 48 Cal. 3d 341 (1989).

Additionally, Labor Code section 2750.3 and the Dynamex holding do not apply to a contract for “professional service,” which continues to be governed by S.G. Borlleo & Sons, Inc. v. Department of Indust. Relations, 48 Cal. 3d 341 (1989).  Labor Code § 2750.3(c)(1).

Professional services mean services that meet any of the following:

  • Marketing, provided the contract work is original, creative in character, and the end result depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contract work;
  • Administrator of Human Resources, provided the contracted work is predominantly intellectual and varied in character that the output produced or the result accomplished cannot be standardized concerning a given time;
  • Travel-agent services provided by either:

    • A person regulated by the Attorney General under Business & Professions Code section 17550, et seq.; or,
    • An individual who is a seller of travel within the meaning of Business & Professions Code section 17550.1(a) and who is exempt from registration under Business & Professions Code section 17550.20(g);
  • Services provided by an individual content contributor, advisor, producer, narrator, or cartographer for a journal, book, periodical, evaluation, or other publication or educational, academic, or instructional work under certain working conditions;
  • Services provided by an enrolled agent who is licensed by the US Department of the Treasury to practice before the IRS;
  • Payment-processing agents through independent sales organizations;
  • A specialized performer hired by a performing arts company to teach a master class for no more than one week;
  • Services provided by a licensed esthetician, electrologist, manicurist (until January 1, 2022), barber, or cosmetologist, provided the individual:
    • Sets rates, processes payments, and is paid directly by clients;
    • Sets work hours and has sole discretion to decide the number of clients and which clients for whom they will provide services;
    • Maintains their book of business and schedules their appointments;
    • Maintains a business license for the services offered to clients; and,
    • Issues a Form 1099 to the salon or business owner form which they rent space.

Other Exemptions from Dynamex & AB5

California Labor Code section 2750.3 and the Dynamex holding do not apply to real estate licensees licensed by the State of California under Business & Professions Code section 10000 et seq., and repossession agencies licensed under Business & Professions Code section 7500.2. Further, Labor Code section 2750.3 and the Dynamex holding do not apply to certain bona fide business-to-business contracting relationships. Relationships between a contractor and subcontractor in the construction industry may also be exempt.  Subcontractors providing construction trucking services may also be exempt.  The relationship between a referral agency and a service provider is exempt from Labor Code section 2750.3 and the Dynamex holding in certain circumstances.  If you are uncertain about the applicability of your position or contract apropos California’s new employee misclassification protections, contact Astanehe Law to discuss your situation with an experienced employment attorney.

Money Damages for California Employee Misclassification

Misclassified employees can recover money damages.  These damages include lost wages arising from the misclassification, including for the employer’s failure to pay minimum wage, overtime, premium pay, and seventh-day pay.  Additionally, misclassified employees can recover unpaid benefits, including vacation pay, paid time off, paid sick leave, and other denied benefit compensation.

Misclassified employees will also recover numerous civil and statutory penalties.

Misclassified employees may also be able to recover their attorney fees and court costs associated with bringing a misclassification claim against the employer.

Injunctive Relief Action for Employee Misclassification

In addition to the remedies mentioned above, a misclassified employee can bring an action for injunctive relief to prevent continued misclassification.  Additionally, the attorney general, city attorney of a city having a population of at least 75,000 or in a city and county, or with the district attorney’s consent, or by a city prosecutor may bring an injunctive relief action on behalf of the people of the State of California.  Labor Code § 2750.3(j).

No Upfront Costs for California Employee Misclassification Lawsuit

Astanehe Law offers contingency representation.  This attorney fee structure means Astanehe Law clients do not pay attorney fees until after obtaining a successful settlement or judgment.  There are no upfront fees for representation and no fees if there is no recovery.  Astanehe Law has obtained a recovery for all employment law clients.

Astanehe Law Knows Employee Misclassification

Michael M. Astanehe possesses a zeal for helping employees bring claims against their employers.  Mr. Astanehe is an aggressive litigator with several years of civil litigation experience.  He is willing to take your case to trial if necessary.  This ferocity ensures that Astanehe Law obtains the highest recovery for each client.

Litigation is stressful. To that end, Mr. Astanehe provides each client with comprehensive legal service so that they remain fully informed and comfortable throughout the process. Astanehe Law strives to make litigation as stress-free as possible.

To discuss the California employee misclassification, AB5, or your right to recover money damages, contact Astanehe Law to speak with an experienced employment attorney today.