The classification of workers as employees or independent contractors has a serious impact on workers, employers, and public revenue. When workers are misclassified, they are deprived of protections such as minimum wage, overtime pay, unemployment insurance, workers’ compensation benefits, health benefits and more. At the same time, employers reduce their labor costs by not providing benefits and reducing their tax liabilities.
In 2018, the California Supreme Court in Dynamex1 established a three-part test, the ABC test, to determine whether a worker is an employee or an independent contractor. This test gave employers the difficult burden of proving its workers are independent contractors.
In response to this decision, the California legislature enacted AB 5, which adopted and expanded the ABC test.
The California Trucking Association brought suit and on April 28, 2021, the 9th Circuit Court of Appeals issued a decision addressing the application of AB 5.
In Cal. Trucking Ass'n v. Bonta, Nos. 20-55106, 20-55107, 2021 U.S. App. LEXIS 12629 (9th Cir. Apr. 28, 2021), the Court held that AB 5 is a generally applicable labor law. Because it impacts the relationship between the motor carrier and its workforce, but does not bind or compel prices, routes or services, it is not preempted by the Federal Aviation Administration Authorization Act of 1994. In other words, AB 5 and the high standard it sets for defining who is and isn’t an independent contractor does apply to these trucking companies doing business in California.
Much of the media attention surrounding Dynamex1 and AB 5 has been focused on the gig economy, particularly with the passage of Prop 22 classifying app-based drivers as independent contractors. However, the gig economy only makes up a small portion of the workers who are misclassified as independent contractors each year.
Truck drivers, construction workers, and janitorial and security services are industries with high rates of misclassification of employees.
The trucking industry has a long history of misclassifying drivers. A 2010 report found that 82% of port truck drivers are classified as independent contractors and an estimated 80% of those workers are misclassified.
In the construction industry, it is estimated that 19% of California construction workers are misclassified. The majority are workers of color and over half are immigrants.
Janitorial and security services have become a key sector of subcontracted work. In 2014 in California, 38% of janitors and 70% of security officers were employed by contractors. These workers are disproportionately people of color or immigrants with 70% born outside of the United States.
In all of these cases, workers had measurably lower earnings and were less likely to have insurance or retirement benefits. This disproportionately impacts workers of color and immigrants who work in these industries at high rates.
Though the law is far from settled, this decision is a victory in the fight to protect workers from the exploitation caused by these misclassifications.
1Dynamex Operations W. v. Superior Ct., 4 Cal. 5th 903, 912, 957 [232 Cal. Rptr. 3d 1, 416 P.3d 1] (2018)
Article contributed by Modesto applicants' attorney Megan Ruble, Esq., CAAA Executive Committee Secretary