Two California Supreme Court Cases to Keep an Eye On

Employment Law
 

The U.S. Court of Appeals for the Ninth Circuit has certified two cases to the California Supreme Court on issues with the potential for major impact on employers in the state: meal and rest break policies and the retroactive effect of the landmark Dynamex Operations West, Inc. v. Superior Court of Los Angeles decision, in which the state’s highest court adopted a new legal standard for determining whether workers should be classified as employees or independent contractors.

  • Meal and rest breaks. In his complaint against CRST Van Expedited, truck driver James Cole claimed that he and his fellow drivers did not receive the meal or rest breaks required under California law. Cole said he was unable to take meal and rest breaks because he needed to “keep the wheels rolling” in order to remain timely on his deliveries and receive payment.

    CRST countered that its policy was for drivers to run their own trips and take breaks appropriately when they felt it was necessary to eat, use the bathroom, do laundry or make personal calls. The employer informed its drivers that they should not drive for over five hours without taking a break, CRST told the court, and California’s policies concerning meal and rest breaks were posted on a bulletin board at the company’s terminal.

    The district court granted summary judgment in favor of CRST, ruling that CRST complied with California law by providing its employees a reasonable opportunity to take meal and rest breaks.

    Cole appealed. He argued that California law mandates that an employer affirmatively provide breaks by adopting a policy authorizing them. CRST did not have such a policy, did not record meal breaks on its payroll statements and did not pay its drivers for rest breaks, he said.

    CRST urged the Ninth Circuit to affirm the district court but the federal appellate panel punted, finding no answers in existing case law.

    While the California Supreme Court held that employers generally have a duty to provide meal periods but not to ensure they are taken in Brinker Restaurant Corp. v. Superior Court, it did not directly address whether the absence of a policy providing for meal and rest breaks constitutes a violation of California labor law, the Ninth Circuit said.

    Due to the importance of the legal issues in the case, the court certified two questions to the state’s highest court: “Does the absence of a formal policy regarding meal and rest breaks violate California law?” and “Does an employer’s failure to keep records for meal and rest breaks taken by its employees create a rebuttable presumption that the meal and rest breaks were not provided?”
  • Independent contractor standard. In a second case with the potential for a significant effect on employers, the Ninth Circuit asked the California Supreme Court to weigh in on the retroactive effect of last year’s Dynamex decision.

     There, the state’s highest court adopted the “ABC” test, which presumptively considers all workers to be employees and permits workers to be classified as independent contractors only if the hiring entity can satisfy three conditions: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; (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 that involved in the work performed.

    A panel of the Ninth Circuit ruled in May that the new standard should be applied retroactively.

    Emphasizing the general rule that judicial decisions are given retroactive effect, the panel wrote that the California Supreme Court “did not fabricate the ABC test anew, but instead carefully explained how the test remains ‘faithful … to the fundamental purpose of [California’s] wage orders.’”

    Retroactive application is “neither arbitrary or irrational” in violation of due process, the panel added, particularly given that wage orders must be liberally construed in a manner that serves their remedial purpose. State courts have also been applying Dynamex retroactively, the panel noted.

    However, the panel granted the employer’s motion for rehearing and withdrew its May decision. “A revised disposition and an order certifying to the California Supreme Court the question of whether [Dynamex] applies retroactively will be filed in due course,” the Ninth Circuit wrote. To date, that revised disposition and order has not been issued.

To read the order in Cole v. CRST Van Expedited, Inc., click here

To read the order in Vazquez v. Jan-Pro Franchising International, Inc., click here

Why it matters: Both cases present the possibility of significant impact on California employers without regard to industry. The California Supreme Court could answer in the affirmative in the Cole case, creating an obligation for employers to establish a formal policy for meal and rest breaks, including the tracking of breaks taken by employees. As for Vazquez, a decision to permit the retroactive application of Dynamex could open many employers to liability going back years for the misclassification of workers under the new standard.