Legal news topics we recently reported on in two separate posts have come together in a third matter potentially significant to some Northern California employers. Specifically, on May 29, San Francisco City Attorney Dennis Herrera issued a news release announcing he issued subpoenas to transportation providers Lyft and Uber for personnel records.
We previously blogged about Dynamex Operations West, Inc. v. Superior Court, a California Supreme Court case in which the court adopted a new, more restrictive test to determine whether a worker is an employee covered by wage and hour, workers' compensation and other similar laws, or an independent contractor not protected by such laws.
The Dynamex ABC test
The new ABC test presumes that a worker has employee status unless the employer can show these three things:
- A: The hiring entity does not control the worker;
- B: The worker's tasks are not within the hiring entity's usual business; and
- C: The worker's normal trade or occupation is in the nature of the work performed for the hiring entity.
We previously advised California businesses and other employers to evaluate carefully each worker's role under the new test to correctly classify him or her either as an employee or an independent contractor. Misclassification as an independent contractor could expose an employer to large tax penalties and fines as well as liability for unpaid overtime, meal breaks and other missed benefits.
The San Francisco subpoenas
Commentators note that Dynamex could curtail the gig economy because some businesses arguably stretch the definition of an independent contractor in this model. That the city attorney has so quickly began to investigate the most obvious gig-type model as used by Lyft and Uber to see if it holds up under the ABC test sends a clear message.
Sooner, rather than later, Northern California businesses and other entities that use labor should consult legal counsel and undertake internal analyses about whether workers are correctly classified.
In light of city employment ordinances, Herrera has requested Lyft and Uber records of names, hours, worker classification, benefits (like leave and health care) and pay. He is quoted as saying that city employers must "provide a fair day's wage for a fair day's work ... [including] basic humane benefits ..."
Impact of arbitration clauses
We also recently wrote about the May 21 U.S. Supreme Court case Epic Systems Corp. v. Lewis, which upheld as enforceable employment-contract provisions that require signing employees to give up their rights to file private or class action lawsuits over employment disputes and instead submit to binding arbitration.
The San Francisco Chronicle cites Bill Gould, a Stanford law professor emeritus, as saying that most Lyft and Uber drivers have agreed to these clauses, so are limited in their ability to sue for employment benefits. When workers are restricted to private arbitration to resolve employment disputes, local governmental authorities like the city attorney in this story may fill the gap by launching similar investigations to bring employers into compliance.