On September 25, 2018, the Ninth Circuit granted Uber’s motion to compel arbitration and decertified a class of 160,000 drivers alleging violations of California state law, including misclassification of the drivers as independent contractors. The decision does not come as a great surprise given the court’s 2016 ruling compelling arbitration in a related case, but it serves as a reminder to companies everywhere to re-examine their independent contractor agreements.
On April 30, 2018, the California Supreme Court substantially narrowed the class of individuals who qualify as independent contractors under California wage-hour law and paved the way for a new wave of class actions. In Dynamex Operations West, Inc., the Court adopted the restrictive “ABC test” used in other jurisdictions for determining when a worker qualifies as an independent contractor under California’s Industrial Wage Orders.
Under that test, the court presumes all workers qualify as employees. A hiring entity can prove that the worker qualifies as an independent contractor only if it can show that the worker:
A) is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
B) performs work that is outside the usual course of the hiring entity’s business; and
C) is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
On Monday, April 2, 2018, the Supreme Court of the United States ruled that car dealerships do not have to pay service advisors overtime under federal law. In a 5-4 decision, the Supreme Court held that service advisors, like auto salespersons, partspersons, and mechanics, are exempt from the Fair Labor Standards Act’s overtime requirements.
On March 5, 2018, the California Supreme Court changed the test for factoring flat sum bonuses into the overtime rate in Alvarado v. Dart Container Corporation of California, ordering a calculation that will increase the costs of overtime for employers who pay such bonuses. Under the federal formula, an employer must divide an employee’s total weekly pay (including non-discretionary bonuses) by the total number of hours the employee worked in a week to get the regular rate; the employer then must pay time-and-a-half that rate for all overtime hours. But under the Alvarado court’s formula, the employer must divide the total weekly pay by only “the number of nonovertime hours the employee [actually] worked during the pay period.” That smaller divisor will lead to higher overtime rates.
The California Court of Appeals held late last week that a plaintiff does not have standing to pursue California Private Attorneys General Act (PAGA) claims on behalf of the state or other employees once he accepts an offer to settle his individual claims. The court in Kim v. Reins International California, Inc. B278642 (Dec. 29, 2017), held that once the plaintiff accepted the settlement offer, he no longer qualified as an “aggrieved employee” within the meaning of the statute. The case expands the potential impact of offers of judgment in California wage-hour class actions.