California court rules in favour of drivers in employment status case


The Supreme Court of California has ruled to restrict the classification of workers as independent contractors, and to adopt a worker-friendly system of classification, following developments in a case concerning parcel delivery organisation Dynamex Operations West.

The original case, Dynamex Operations West v Charles Lee, regards Charles Lee, a former delivery driver for Dynamex Operations West, who raised a complaint against the organisation in January 2005. Lee, on behalf of himself and other similarly situated drivers, argued that prior to December 2004, delivery drivers at Dynamex Operations West were classified as employees and were compensated according to the state’s wage and hour laws. After this date, the organisation converted all its drivers to independent contractors in order to make financial savings.

As independent contractors, delivery drivers are required to provide their own vehicles and pay for all of their transportation expenses, including fuel, tolls, vehicle maintenance and vehicle liability insurance, as well as pay taxes and workers’ compensation insurance. Drivers are also expected to wear Dynamex Operations West’s branded clothing, which they have to purchase themselves.

Lee claimed that, although the organisation’s delivery drivers are now classified as independent contractors, they were still performing the same tasks in the same manner as when they were classified as employees. Lee therefore argued that the drivers should be labelled as employees and receive the protections available under California’s wage orders.

The state’s wage orders impose obligations relating to minimum wages, maximum working hours and working conditions, such as the number of minimally required meal and rest breaks.

The trial court that originally heard the case denied class certification; however, the Court of Appeal reversed this decision and certified a class action. In response, Dynamex Operations West challenged the trial court’s denial of its motion to decertify the class to the Court of Appeal. The case was then handed to the Supreme Court.

The Supreme Court explored how the classifications of employee or independent contractor are defined. It consequently adopted an ‘ABC test’. Under this, to be classified as an independent contractor the worker must be free from the control and direction of the employer, completing work that is outside the usual course of the employer’s business and customarily engaged in independently established trade, occupation or business. If any of these criteria are not met, then the worker is an employee, and is entitled to wage order protections.

The Supreme Court upheld the trial court’s determination that there is a sufficient commonality of interest to support certification of the proposed class of 184 drivers, and it affirmed the judgement of the Court of Appeal.

Judge Cantil-Sakauye, who ruled over the proceedings, said: “Unlike other types of businesses in which the delivery of a product may or may not be viewed as within the usual course of the hiring [organisation’s] business, here the hiring entity is a delivery [organisation] and the question [of] whether the work performed by the delivery drivers within the certified class is outside the usual course of its business is clearly amenable to determination on a class basis.

“As a general matter, Dynamex obtains the customers for its deliveries, sets the rate that the customers will be charged, notifies the drivers where to pick up and deliver the packages, tracks the packages and requires the drivers to utilise its tracking and recordkeeping system. As such, there is a sufficient commonality of interest regarding whether the work performed by the certified class of drivers who pick up and deliver packages and documents from and to Dynamex customers on an ongoing basis is outside the usual course of Dynamex’s business to permit that question to be resolved on a class basis.”