Driver’s Misclassification Suit Gets New Life From Ninth Circuit

Employment Law


The retroactive application of Dynamex may permit a Grubhub driver’s suit alleging he was misclassified as an independent contractor, according to a new decision from the U.S. Court of Appeals for the Ninth Circuit.

For four months in late 2015 and early 2016, Raef Lawson worked for Grubhub as a food delivery driver in the Los Angeles area. Grubhub classified Lawson as an independent contractor rather than as an employee.

Lawson sued. He argued that he should have been classified as an employee, asserting claims under the California Labor Code for the failure to pay minimum wage and overtime, as well as the failure to reimburse expenses. He sought to represent a class of similarly situated delivery drivers in the state, and sought penalties under the Private Attorneys General Act (PAGA).

A district court denied class certification and then bifurcated a trial on Lawson’s claims into two parts. The first part addressed whether Lawson was misclassified as an independent contractor.

Following a bench trial, the court held that Lawson was properly classified as an independent contractor using the multifactor test set out by the California Supreme Court in S.G. Borello & Sons, Inc. v. Department of Industrial Relations.

Lawson appealed. Three months later, the state’s highest court issued its landmark decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, adopting the ABC test for the classification of workers.

The ABC test presumptively considers all workers to be employees, only allowing classification as an independent contractor if the hiring entity demonstrates the worker in question can satisfy all three conditions:

  1. 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;
  2. That the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. 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.

In September 2019, the California Supreme Court agreed to answer the question of whether Dynamex applies retroactively, and Lawson’s appeal was stayed pending the result.

Further complicating the issue, the California legislature passed Assembly Bill 5 (https://www.manatt.com/insights/newsletters/employment-law/landmark-legislation-ab5-codifies-dynamex-abc-test), codifying the ABC test. In November 2020, state voters passed Proposition 22, which provides that, if certain conditions are met, “app-based drivers” are independent contractors.

Prop 22 took effect on Dec. 16, 2020, and in January 2021, the California Supreme Court held that Dynamex applies retroactively in Vazquez v. Jan-Pro Franchising International, Inc.

The Ninth Circuit then took up Lawson’s case again.

First, the panel affirmed the denial of class certification. All the members of Lawson’s putative class—except Lawson and one other—signed agreements waiving their right to participate in a class action, the court said. Because he was neither typical of the class nor an adequate representative, and because the proceedings would be unlikely to generate common answers, the district court properly held Lawson failed to satisfy the requirements of Rule 23(a).

Next, the panel rejected Grubhub’s argument that Prop 22 “abated” the retroactive application of Dynamex’s ABC test to Lawson’s pending claims.

“California has a settled presumption against interpreting statutes—including ballot propositions—as having retroactive application,” the Ninth Circuit wrote. “Proposition 22 does not purport to be retroactive.”

Although Grubhub insisted that the passage of the ballot measure prevented collection of employment benefits owed under the ABC test unless they were reduced to judgment before the passage of Prop 22, the panel was not persuaded.

“Proposition 22 did not wholly abolish causes of action under the ABC test,” the court wrote. “Rather, it crafted a conditional and prospective exemption from the test for some workers. Proposition 22 neither changed the underlying Labor Code provisions governing these claims nor ‘changed the portion of AB 5 that set forth the ABC test itself.’”

Finally, the Ninth Circuit declined to apply the ABC test to Lawson’s claims in the first instance, remanding the dispute to the district court.

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

Why it matters: The Ninth Circuit was forced to grapple with several years of major changes to state law with respect to the independent contractor/employee classification issue, from Dynamex to AB 5 to Prop 22 and Vazquez. For employers, the decision reaffirms that the ABC test may apply to historical Labor Code claims.

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