Independent Contractor or Not? Garcia Provides Some Answers for Employers

Independent Contractor or Not? Garcia Provides Some Answers for Employers

Last month, the appellate court in Garcia v. Border Transportation Group, LLC reached an important decision that could give employers some much-needed insight into distinctions between independent contractors and employees. Earlier this year, in late April, the California Supreme Court issued a decision in a case called Dynamex Operations West, Inc. v. Superior Court, which put new standards in place for employers to adhere to in classifying their workers as independent contractors as opposed to employees. In the months since this decision, there’s been a decent amount of confusion and uncertainty over how exactly to abide by these standards and avoid legal pitfalls. Garcia’s recent decision may provide some guidelines to help clarify the new standard.

In Garcia, the trial court granted summary judgment for the employer, declaring that plaintiff Garcia was properly classified as an independent contractor. Some of the claims in this case were based on IWC Wage Orders, which establish guidelines for ensuring employees receive minimum wage, overtime compensation, meal and rest breaks, etc.

Meanwhile, as the employee’s appeal of this decision was pending, the CA Supreme Court issued its opinion in Dynamex. The appellate court therefore used Dynamex’s reasoning on Garcia’s appeal, and in doing so the employer could not show that the plaintiff had an independently established business (part C of Dynamex’s three-pronged ABC test to determine independent contractor status). As a result, the court reversed the trial court’s summary judgment – but only on the portion of the claims based on the IWC Wage Orders. The appellate court upheld the trial court’s summary judgment on plaintiff’s claims for wrongful termination, waiting time penalties, and an unfair competition claim, which came under the California Labor Code. The court clarified here that Dynamex is meant to apply specifically to claims based on California Wage Orders – the appropriate test for the remaining claims under the California Labor Code still hinged on the extent of control the employer maintained over the worker.

The court mentions in a footnote that, while the issue was not raised in this case, the Dynamex decision could potentially apply retroactively. The court states that (1) generally, judicial decisions have retroactive effect; (2) exceptions could exist where parties relied on the previously existing law; (3) the Dynamex court declined a request to limit its application to prospective cases; and (4) that though Dynamex seems surprising, there are a great number of similarly surprising decisions have been applied retroactively in the court’s history.

Though this decision doesn’t provide crystal clarity on the implications of the Dynamex decision, it does seem to confirm that Dynamex’s test is limited to Wage Order claims. Employers should still be wary when they believe they may be treading the line between hiring independent contractors and employees, because it’s still difficult to know how litigation in this realm will pan out under these new standards – Employers would be wise to contact an attorney versed in labor and employment law for help navigating these murky waters.

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