Garcia v. Border Transportation Group: Two Standards, One Issue

in Employment Law by

The Court of Appeal, Fourth Appellate District, recently issued an opinion clarifying the appropriate test for whether or not a person is an “employee” or an “independent contractor” in the context of a wage order claim.  In Garcia v. Border Transportation Group, LLC, 28 Cal. App. 5th 558 (2018), plaintiff Jesus Garcia (“Garcia”) was a taxi driver for defendant Border Transportation Group (“BTG”). Following some disputes between Garcia and BTG over the taxi lease, Garcia filed suit in 2015 for wage and hour violations occurring between 2010 and 2014.  Garcia’s complaint also included non-wage-order claims for wrongful termination in violation of public policy, failure to pay overtime, and waiting time penalties.  The issue was whether Garcia would be classified as an employee or an independent contractor under California law.

In the trial court, BTG moved for summary judgment, arguing that Garcia was an independent contractor rather than an employee.  The trial court granted summary judgment as to all causes of action (wage order and non-wage-order claims), citing factors such as the taxi lease agreement between Garcia and BTG expressly disclaiming an employer/employee relationship, lack of instruction on operation of the taxi, lack of an employee handbook, that BTG did not dictate Garcia’s rates or take any fares, and that Garcia marketed his taxi business in his own name.  The rule the trial court used to determine whether or not Garcia was an employee was the multi-factor test from S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).

Garcia appealed.  After the matter had been briefed in the Court of Appeal, the Supreme Court of California issued its ruling in Dynamex Operations West, Inc. v Superior Court, 4 Cal. 5th 903 (2018).  Dynamex, which dealt with the employee-independent contractor issue, adopted a broad definition of the word “employ” based on Industrial Welfare Commission wage orders (orders regulating hours, wages, working conditions, etc. in certain occupations).  This definition states that “employ” means to “suffer, or permit to work.”  The Dynamex court then decided on a three part “ABC” requirements test, rather than the multifactor Borello approach employed by the trial court in Garcia.  Under the “ABC” test, a worker is presumptively an employee unless all three of the following requirements are met: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.  Dynamex, 4 Cal. 5th at 957.  The Dynamex case provided the framework in which Garcia was decided on appeal.

Focusing on “C” from the Dynamex “ABC” test, the Garcia court decided on appeal that there was a triable issue of material fact as to whether or not Garcia was an employee of BTG for his wage order claims.  While analyzing “C,” the Dynamex court stated that the issue is not whether the person could have an independent business or profession, but whether they actually do have that independent business or profession.  Id. at 962, fn. 30.  When “C” was applied to Garcia, no evidence showed Garcia was providing services independently of his lessee relationship with BTG.  This requirement of the “ABC” test was not met, and the case was reversed and remanded for entry of an order denying summary judgment of Garcia’s wage order claims.  The rebuttable presumption in the Dynamex “ABC” test makes classification as an employee more likely than under the Borello test.  In wage order claims, courts now “look beyond labels and evaluate whether workers are truly engaged in a separate business or whether the business is being used by the employer to evade wage, tax, and other obligations.”  Dynamex, 4 Cal. 5th at 958, fn 26.

Perhaps more significant than the court’s ruling on Garcia’s wage order claims was the court’s ruling on Garcia’s non-wage-order claims.  The court upheld summary judgment of these claims and determined that the “ABC” test would not apply.  The Garcia court followed reasoning from the Court of Appeal in Dynamex, stating that the “suffer or permit to work” standard is logically applied to wage order claims.  This is because the wage orders define “employ” in that language and regulate “very basic” working conditions for California employees, thus warranting a broad definition of employment.  As for non-wage-order claims, the Garcia court found no reason to apply the “ABC” test, particularly because Borello remained the rule in the worker’s compensation context.

The Garcia court’s decision to continue to apply the Borello test to non-wage-order claims was a victory for employers.  There is no rebuttable presumption that a worker is an employee under the Borello test, making it favorable to employers that classify workers as independent contractors.

A striking feature of Garcia was the use of two different standards to analyze the issue of whether a worker is an employee or an independent contractor.  It remains to be seen whether this trend will continue, or whether the “ABC” test will be applied to non-wage-order claims in the future.  Employers will be hoping for the former, while workers will be hoping for the latter.