California High Court: ABC test for performing workers is retroactive, to the detriment of Uber and Lyft

California’s strict ABC test that makes it difficult to claim workers are independent contractors applies retroactively, the state Supreme Court ruled on Thursday in a ruling that could hurt Uber, Lyft and other companies concerts in many pursuits.

The ABC test was released in an April 2018 ruling called Dynamex that said workers are to be considered employees unless they (a) are working without the control of the hiring entity; (b) perform work outside the usual court of the enterprise of the hiring entity; and c) ensure that independent companies do this type of work.

“Public order and fairness concerns, such as the protection of workers and the benefit of companies that comply with wage obligations, favor the retroactive application of Dynamex,” said a unanimous opinion drafted by the Chief Justice Tani Cantil-Sakauye. The Ninth Circuit Court of Appeals in May 2019 said Dynamex should be retroactive.

The Dynamex ruling underpins the controversial AB5 gig work law, which codified the ABC test while exempting many professions and expanding its reach beyond salary orders.

Uber, Lyft, DoorDash and other gig companies classify workers as independent contractors rather than employees, saying they rely on the flexibility of this model. It also saves them millions of dollars on benefits, minimum wage, overtime and other expenses. The concert companies spent $ 220 million convincing voters to pass November 22, which maintains their workers as independent contractors and exempts them from AB5 as of its passage in mid-December. Labor groups filed a lawsuit to overturn the measure this week.

The prop. 22 does not retroactively protect concert societies. They face a series of lawsuits over job classification, both by government agencies and their own workers. The Supreme Court ruling means that if the concert companies lose these cases, they could face much higher penalties since they could be found liable for actions before Dynamex goes into effect in April 2018.

Most significantly, the California attorney general and three city attorneys sued Uber and Lyft in May. The California labor commissioner sued the two ridesharing companies in August, claiming he stole wages by misclassifying drivers. Various drivers and couriers have joined forces in misclassification lawsuits against Uber, Lyft and other concert companies.

“They won’t have a chance,” said Bob Eassa, associate at Duane Morris of San Francisco, a management law firm. “For all outstanding cases, the test that is applicable to them will be Dynamex and it will go back as far as the limitation period allows”, typically three or four years, depending on the applicable business code.

“Although Uber and Lyft spent record amounts of money rewriting the law for their benefit, they cannot change the fact that they broke the law for years before Prop. 22 by not classifying their drivers as employees. Said John Coté, a spokesperson for San Francisco City Attorney Dennis Herrera, who is one of the plaintiffs in the California Attorney General’s lawsuit against the ridesharing companies. “This decision reinforces the position we have maintained throughout.

Uber and Lyft did not immediately respond to requests for comment. The California attorney general’s office declined to comment.

Shannon Liss-Riordan, a Boston lawyer who has filed misclassification cases on behalf of workers and janitors, said the ruling should help California workers seek redress for wage violations that occurred before April 2018. She said pending lawsuits and arbitrations against Uber, Lyft, Grubhub, DoorDash, Postmates, Instacart, Shipt and Amazon.

The court “stressed that this strict test was necessary because the earlier softer standard … had led to inconsistent results that did not adequately protect workers,” she said in an email. “This decision is a further indictment of the Prop. 22. “

But MC Sungaila, chairman of Buchalter law firm’s appeals practice, said the new ruling could be damaging to employers.

“In the wake of the pandemic, this raises concerns for small businesses that could be hit by backward lawsuits over wages and hours,” she said in a statement.

Besides construction workers, the ABC test affects other sectors, said Laura Padin, senior counsel for the National Employment Law Project in Washington.

“We see (misclassification) a lot in industries where work is done primarily by people of color, like janitorial, home care and trucking,” she says. “Often these are low-wage industries where workers don’t have a lot of bargaining power.”

The court ruling “will greatly facilitate the accountability of companies that have been practicing this type of program for years,” she said.

For example, janitorial firm Jan-Pro, in a case that also underpins Thursday’s ruling, has avoided turning its predominantly immigrant workforce into employees by requiring its janitors to attest that they owned independent franchises. It was “even though Jan-Pro controlled most of the work and they weren’t running their own business,” she said. “Jan-Pro was able to escape workplace protections and offload to its workers the risks and expenses normally assumed by the employer.”