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Issue 1 - 2018 Newsletter

In This Issue: 

-The Deepening Pain of Dynamex
-Salary History Clarification Effective January 1, 2019

 

The Deepening Pain of Dynamex

Employers reeled when the California Supreme Court issued its ruling in Dynamex in April, 2018.  For anyone who missed it, the Dynamex decision established that California businesses now must prove all three parts of the so-called “ABC” test in order to properly classify their workers as Independent Contractors. 

Instead of using a balancing test which took into account a number of different factors (known as the “Borello” multi-factor test), the Supreme Court in Dynamex established a much more stringent three prong test employers must meet:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • the worker performs work that is outside the usual course of the hiring entity’s business; and
  • the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

 

Unfortunately, some California courts seem poised to keep broadening the application of Dynamex’s restrictive test.  Although Dynamex had left open the question of whether it would apply retroactively (exposing thousands of California employers to liability and business-jeopardizing lawsuits and claims), a recent California court ruling suggests that retroactivity will, indeed, be the “new normal.”

An Orange County Superior Court judge recently ruled that Dynamex should apply retroactively.  In the matter of Johnson v. VCG-IS, LLC, a class of exotic dancers brought a representative action against the Imperial Showgirls nightclub alleging they had been misclassified as Independent Contractors. The court concluded Dynamex should apply retroactively to the case, which had originally been filed in 2015 - long before Dynamex was ever decided.  The court further ruled that Dynamex should apply not just to claims under the IWC Wage Orders, but to wage and hour claims under the California Labor Code.

This one Orange County judge’s decision is not precedent for all of California.  However, it raises the serious concern that the Dynamex case will be applied retroactively by other judges.

Especially with Dynamex now potentially applying to the past, California employers should work with their employment counsel to assess the status of their Independent Contractors.

For more information about any of these new cases and their implications for employers, please contact the shareholders at Simpson, Garrity, Innes & Jacuzzi, P.C. – Paul V. Simpson, Ronald F. Garrity, and Marc L. Jacuzzi.

Salary History Clarification Effective January 1, 2019

This past January, a new law took effect in California prohibiting employers from asking about or relying on salary history information when making hiring decisions.  In addition, the new law requires employers to “provide the pay scale for a position to an applicant applying for employment.”  The law, however, left many questions unanswered, including the meaning of the terms “pay scale,” “reasonable request,” and “applicant.”  Recently, the legislature enacted (and Governor Jerry Brown signed) new legislation, AB 2282, trying to answer these questions. 

First, AB 2282 amends California Labor Code section 432.3 and defines the following:

  • “Pay scale”: a salary or hourly wage range
  • “Reasonable request”: a request made after an applicant has completed an initial interview with the employer
  • “Applicant” or “applicant for employment”: an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position

 

Thus, the new law clarifies that employers only need to provide salary or hourly wage range information to individuals who are not current employees, who are seeking employment with the employer, and who have completed an initial interview with the employer. 

Second, AB 2282 amends California Labor Code section 1197.5 (the Fair Pay Act) and clarifies that prior salary shall not justify any type of disparity in compensation, including based on sex, race, or ethnicity.  Notably, however, the new law still allows employers to make compensation decisions based on an existing employee’s current salary if any wage differential resulting from that decision is justified by one or more factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a bona fide factor other than sex, race or ethnicity, such as education, training, or experience.  This exception allows employers to provide current employees with raises or other incentives without violating the law.  

For more information about this new law and its implications for employers, please contact the shareholders at Simpson, Garrity, Innes & Jacuzzi, P.C. – Paul V. Simpson, Ronald F. Garrity, and Marc L. Jacuzzi.

What’s New for Employers in 2018: California Legis...
Issue 1 - 2017 Newsletter

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