Contractor or Employee? Law Firm Wins Labor Misclassification Argument

Labor misclassification is a serious problem, costing the state over $7b annually in tax revenue and supplemental public services. Through “misclassification scheme[s]” such as “man in the middle,” employers try to avoid compliance with labor laws, avoid offering rest breaks, meal breaks, medical insurance, overtime pay, workers compensation insurance, unemployment insurance, or covering their fair share of employer taxes. Mejia v. Roussos Constr., Inc., 76 Cal. App. 5th 811, 815 (2022).

The firm is pleased to report that in a hard fought matter spanning eight years, after a trial, and after four years on appeal, the California Court of Appeal ruled that employers cannot escape misclassification liability simply by farming out their hiring process to a third party. On this question, the Court ruled in favor of Tong Robbins' clients, stating in plain language, “We agree with plaintiffs." Id. at 817.

In this decision, the Court of Appeal found that the ABC Test articulated originally in the matter of Dynamex, codified by the California Legislature in a law known as AB 5, see Cal. Lab. Code § 2775 – 2787, contains no “threshold hiring entity test” that would otherwise allow employers to escape liability for misclassifying their workers as independent contractors. Id. at 818-19.

In this way the Mejia Court now stands with every other source of authority that has ever examined this question, in concluding bosses cannot defeat, undermine, nor vitiate the ABC Test and thereby sidestep their lawful responsibilities as employers in the State of California. See People v. Uber Techs., Inc., 56 Cal. App. 5th 266, 307 (2020) (“We reject defendants’ invitation to import a threshold ‘hiring entity’ inquiry . . . .”); see also Ludlow v. Flowers Foods, Inc., No.18CV1190-JO-JLB, 2022 WL 2441295, at *3 (S.D. Cal. July 5, 2022) (holding “the law does not require any threshold ‘hiring entity’ analysis before the Dynamex ABC Test is applied to determine whether a worker is an employee or independent contractor”); Fleming v. Matco Tools Corp., No. 19-CV-00463-WHO, 2021 WL 673445, at *6 (N.D. Cal. Feb. 21, 2021); James v. Uber Techs. Inc., 338 F.R.D. 123, 131–32 (N.D. Cal. 2021).