Why it matters

We continue to see the impact of the California Supreme Court’s Dynamex Operations West, Inc. v. Superior Court of Los Angeles decision about what is the legal standard to determine whether workers should be classified as employees or independent contractors.

Dynamex, as our usual readers know, adopted a test that ultimately makes it much more difficult for businesses to classify workers as independent contractors. In a closely watched case on point out of California federal court, the district court magistrate judge acknowledged in a new order that her earlier decision might have been different had the Dynamex opinion been on the record. The case, Lawson v. Grubhub, Inc., was heard before U.S. Magistrate Judge Jacqueline Scott Corley, and while she declined to vacate her earlier finding, she noted the plaintiff’s motion raises a substantial issue. It’s likely the order will be reversed upon appeal.

Lawson v. Grubhub, Inc., involves Raef Lawson, a Grubhub driver who alleged that he was incorrectly classified as an independent contractor. Grubhub moved to dismiss the suit earlier this year, and the district court sided with the company, finding that Grubhub did not control Lawson’s work. Lawson appealed, and after the Dynamex decision was issued, Lawson filed a motion seeking relief from the judgment. His case would have had a different outcome if the state’s highest court had adopted a new legal standard for determining whether workers should be classified as employees or independent contractors, he argued. “After carefully considering the issues, and having had the benefit of oral argument, the Court declines to definitively rule that it would vacate the judgment, but the motion does raise a substantial issue,” the court wrote. However, the court also said the question of whether or not Dynamex applies retroactively should properly be made to the U.S. Court of Appeals for the Ninth Circuit.

Detailed discussion

Raef Lawson briefly worked as a restaurant delivery driver for Grubhub in Southern California in late 2015 and early 2016. He was added as a plaintiff to a putative wage and hour class action against the company in California state court. The case was bifurcated: The first phase involved a trial on Lawson’s individual claims and whether he was an “aggrieved employee” under the Private Attorneys General Act (PAGA). Assuming the court found in the affirmative, the second phase would have resolved the PAGA claim after additional discovery. After the first phase, the court ruled that Lawson was an independent contractor, not an employee, because Grubhub lacked sufficient control over the plaintiff’s work. The court applied the multifactor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, where the most significant consideration is the employer’s right to control work details.

That ruling was in February, and a few weeks later, the California Supreme Court issued its game-changing opinion in Dynamex, where it adopted a new legal standard for determining the classification of workers. The new “ABC” test presumptively considers all workers to be employees and permits workers to be classified as independent contractors only if the hiring entity demonstrates that the worker in question satisfies three conditions.

Lawson—who had appealed to the Ninth Circuit—filed a motion for relief from judgment based on the new standard established in Dynamex. Although Judge Corley explained that the court lacked jurisdiction to grant a Federal Rule of Civil Procedure 60(b)(6) motion because of Lawson’s pending appeal, she considered the merits of the motion.

The plaintiff argued that Dynamex required a reversal of the court’s February ruling as the factual findings at trial indicated that Grubhub could not satisfy any of the prongs of the ABC test.

Judge Corley acknowledged that Dynamex upset a settled legal principle—as Borello had been “nearly unanimously” applied before the California Supreme Court decision—but noted that the parties had always been likely to appeal the trial court outcome because it was one of the first cases involving a gig economy worker. Further, no real delay occurred, because the Dynamex opinion was released shortly after the trial court’s decision.

However, the court noted that Lawson’s argument about the application of Dynamex made one important assumption: that the court’s opinion would have retroactive application. The answer to this “pivotal question” remains uncertain.

“The outcome of Plaintiff’s (implied) motion to vacate the judgment hinges on the application of Dynamex to the wage order claims at this stage in the proceedings,” Judge Corley wrote. “If it does, the Court would likely revisit the judgment, at least as to the overtime and minimum wage claims. The answer to the retroactivity question, however, is complicated and the Court declines to definitively answer it on this record. Nonetheless, the Court can and does say that Plaintiff’s motion raises a substantial issue.”

As for the defendant’s argument that the court should deny the plaintiff’s motion to let the U.S. Court of Appeals for the Ninth Circuit decide the retroactivity question in the first instance, it “is directed to the wrong court; that is an argument to make to the Ninth Circuit,” the court said.

To read the order in Lawson v. Grubhub, Inc., click here.