In Jesus Cuitlahuac Garcia v. Border Transportation Group, LLC, et al, the California Court of Appeal, Fourth Appellate District has held that the ABC test set forth in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018) applies only to causes of action brought under wage orders.

Plaintiff Garcia was a taxicab driver for several years with Border Transportation Group (“BTG”). In 2015, a year after ceasing work for BTG, he sued BTG and two individual defendants for various wage and hour violations.

The trial court granted defendants’ motion for summary judgment on the basis that plaintiff Garcia was an independent contractor, not an employee. The trial court considered defendant’s evidence which established various ways in which it did not exercise control over Garcia, including evidence concerning the “secondary indicia” set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989), that bear on employment status.

While on appeal, the California Supreme Court issued its ruling in Dynamex, which adopted the “ABC test” to determine the employee-independent contractor question as to wage order claims.

The Court of Appeal Diverges from Massachusetts’s Formulation of Part C of the ABC Test

BTG argued in supplemental briefing that even under Dynamex, Garcia was an independent contractor because the Supreme Court adopted the Massachusetts version of the ABC Test, and a 2015 Massachusetts case, Sebago v. Bos. Cab Dispatch, Inc., 28 N.E.2d 1139, applied that same version of the ABC test to find that taxicab lessees were independent contractors.

The Fourth Appellate District rejected the ABC Test as set forth in Sebago because the court there defined the “critical inquiry” in Part C of the ABC test as whether “the worker is capable of performing the service to anyone wishing to avail themselves of the services or, conversely, whether the nature of the business compels the worker to depend on a single employer for the continuation of the services.” However, Dynamex makes clear that the question in part C is not whether the employer prohibited or prevented a worker from engaging in an independently established business. The Court of Appeal stated that “[t]he Massachusetts test is simply not the formulation of part C articulated in Dynamex.” Instead, the appropriate inquiry under part (C) is whether the person engaged in covered employment “actually has such an independent business, occupation, or profession, not whether he or she could have one.’ ”

Rejecting Sebago’s formulation of the ABC test, the Fourth Appellate District looked to a recent Connecticut Supreme Court decision which similarly rejected the Massachusetts test for Part C. Because the Connecticut Supreme Court declined the Massachusetts test for Part C based on JSF Promotions, Inc. v. Administrator 828 A.2d 609, 613 (Conn. 2003), a case favorably cited by Dynamex, the Court concluded that it “follow[s] the Kirby [of Norwich v. Administrator, Unemployment Compensation Act, 176 A.3d 1180 (Conn. 2018)] approach and reject[s] Sebago’salternative construction.”

The Court then found that defendants failed to establish Part C of the ABC test. Specifically defendants did not establish that Garcia “is customarily engaged in an independently established trade, occupation, or business” apart from his work for BTG.

ABC Test Applies Solely to Wage Order Claims

The good news, however, is that the Court of Appeal held that Dynamex’s ABC independent contractor test applies only to causes of action arising under the IWC wage orders. The Court citedCalifornia Trucking Assn. v. Su, 903 F.3d 953, 959, fn. 4. (9th Cir. 2018), which recognized that “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.” The Court also reasoned that Dynamex contemplated the different standards that could apply to different statutory claims and found “it is possible under Borello that a worker may properly be considered an employee with reference to one statute but not another.” Finally, the Court of Appeal in Dynamex had expressly held that the Borello standard is applied to causes of action predicated solely on Labor Code, which the California Supreme Court did not address.

The Fourth Appellate District reversed the trial court’s order granting summary adjudication as to causes of action which arose from the wage orders. Garcia’s claims for overtime, wrongful termination, waiting time penalties, and UCL claims are governed by the common law test articulated in Borello.

Conclusion

Because the Court has confirmed that the appropriate inquiry under Part C of the ABC test is whether the worker actually customarily engaged in an independent established trade, occupation, or business, employers may have more difficulty meeting this criteria. In the context of misclassification class actions, however, this should make it more difficult for workers to establish commonality as to Part C – that a worker class was actually engaged in an independent established trade, occupation or business – because the Part C inquiry naturally requires much more individualized inquiries. The Court’s limitation of the ABC test to IWC Wage Orders is an overall victory for employers, and may also lead to more individualized issues and problems for those looking to certify a class.