Employment & Business Attorneys Campbell CA

Two recent decisions by the California Supreme Court and the United States Supreme Court effected a significant (and likely long-term) impact on the rights of employees and employers.  One decision is being hailed as a victory for employees and the other is being hailed as a victory for employers.  We think each decision benefits both, although only time will tell.

In Dynamex Operations West, Inc. v. Superior Court the California Supreme Court held that a person providing services to another is presumed to be an employee under the Wage Orders issued by the Industrial Welfare Commission.  Employers cannot avoid liability for overtime or any other benefits provided by the Wage Orders by classifying workers as  “independent contractors” unless they can prove that the worker meets what court refers to as the “ABC” test: (A) The worker is free from the control and direction of the hirer; (B) The worker performs work that is outside the “usual course” of the employer’s business; and (C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work being performed by the employer.  

The “ABC” test makes classifying workers as independent contractors more challenging for employers.  This can be frustrating; perhaps both parties prefer such an arrangement. However, even an agreement to be classified as an independent contractor is not binding if the nature of the work precludes it.  The good news for employers is that now most of the “guesswork” of the determination has now been removed, and since presumably everyone will be operating under the rules articulated by the court, the playing field will be leveled and competitors will not have an unfair advantage.  

In Epic Systems Corp. v. Lewis the United States Supreme Court held that employers can require employees to sign arbitration agreements that bar them from filing any lawsuits, including class actions.  This was not unexpected, since most courts have held that employers can require employees to sign arbitration agreements as a condition of employment.  This case was different because the employee claimed that the class action waiver in the arbitration agreement violated a provision in the National Labor Relations Act protecting the rights of employees to form and join labor unions, engage in collective bargaining through their representatives, and “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

We agree with the Court’s conclusion that a class action is not a “concerted activity for the purpose of collective bargaining….”  A class action is a lawsuit filed by one or more persons seeking damages on behalf of an entire class of persons, whether they want to be involved or not.  If the class action is “certified” and members of the class don’t opt out, they are represented by the attorneys retained by the lead plaintiff, so they don’t even get to choose their own representatives.

The Court’s decision in Epic caused much hand wringing, with many pundits bemoaning the “blow to employees” etc.  We take a different view.  

We think that in the future we will see fewer splashy headlines announcing lawsuits worth hundreds of millions of dollars.  That may in fact be bad news for class action lawyers, but the “little picture” may be better for the employees themselves. The informal nature of arbitration makes it relatively easy for employees to file claims and have their cases heard and decided a lot sooner than any class action, which typically drag on for years.

While it is true that some employees will now be unable to find attorneys to represent them if their claims are too small, the statutory remedies awarding fees to a prevailing employee still are in play.  It does not matter if the employee’s case is in court or arbitration.  In addition, employers are required to pay the arbitrator’s fee.  The employee only pays a nominal initial filing fee.  In addition, there is nothing stopping employees from acting in concert in order to share costs, fees, and evidence.  Finally, employees who file individual demands for arbitration will recover more money for themselves than they would in the settlement of a class action in which the individual class members have no representation in the negotiations. We are loathe to criticize our colleagues doing class action work, but we think in most class actions the attorneys make most of the money, not the class members. Let’s hope that changes now.



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