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Counsel’s Corner: Recent Cases Illustrate Independent Contractor Compliance Challenges for Employers

Last month, the U.S. Supreme Court decided not to hear an appeal on a case concerning the issue of whether truck drivers should be classified as company employees or independent contractors.  Like so many other cases which seek review by the nation’s highest court the case, California Trucking Association (“CTA”) v. Julie A. Su, was denied certiorari without explanation.

CTA was seeking review on the issue of what the correct independent contractor classification test was that should apply to their case.  The Ninth Circuit Court of Appeals ruled that the California common law, Borello, test would apply and that it would not be pre-empted by federal law.  By the time the case was submitted for U.S. Supreme Court review, California’s Supreme Court issued the Dynamex Operations West, Inc. v. Superior Court (“Dynamex”) decision which sets forth the new ABC test, which is a stricter standard for employers than the Borello test.  The CTA now maintains that the Dynamex ABC standard could end the independent contractor model for the trucking industry in California.

The Ninth Circuit Court of Appeals also recently remanded a case, Haitayan v. 7-Eleven, Inc., back to a lower federal district court with instruction to reconsider a ruling involving worker classification due to the decision in Dynamex.  The Haitayan decision was unpublished.  However, it demonstrates the Ninth Circuit’s position relating to Dynamex and its indication that it may follow Dynamex.   In the Haitayan case the federal district court dismissed two lawsuits brought by 7-Eleven franchisees that were based on claims that they were employees, not independent contractors.  The Ninth Circuit held on appeal that the district court erred because it did not consider the plausibility of the franchisees’ claims.  In addition, the Ninth Circuit indicated that it was considering whether Dynamex decision would apply to franchisees as it was reviewing the matter in another case, Vazquez v. Jan-Pro Franchising Int’l Inc.

While the Ninth Circuit appears to be adopting more strict worker classification standards the Fifth Circuit Court of Appeals may be taking a different position on this issue.  That court recently issued an employer friendly less strict decision in Parrish v. Premier Directional Drilling, L.P., 917 F.3d 369 (5th Cir. 2019).  In that case the Fifth Circuit Court of Appeals held that independent contractors engaged as directional drilling consultants were correctly classified even though they did the same work as some of the company’s employees and were supervised in the same manner.  Some of the independent contractors had actually been former employees.  These facts would absolutely lead to an employee classification under Dynamex.  The 5th Circuit’s decision was based in large part on its conclusion that the highly skilled workers were not sufficiently economically dependent (they could accept or turn down work and negotiate their pay) upon the company to support their argument that they should be classified as employees. 

These recent cases illustrate the challenges for companies engaging workers as independent contractors.  Each engagement requires an individualized assessment.  That assessment will depend on the nature of the work, the industry involved, the various and often conflicting state and federal laws.  Standards are not consistent and are not moving toward consistency as the U.S. Supreme Court has not taken a position yet. 

Geoff Mohun is General Counsel and the Chief Compliance Officer for iWorkGlobal. He has a Juris Doctorate from John F. Kennedy School of Law and is a graduate of California State University, Chico. He was admitted to the State Bar of California in 1997. Connect with Geoff on LinkedIn.

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