Opinion
F073576
09-27-2019
ALLEN SHEPHERD, Plaintiff and Appellant, v. EDDIE HONARCHIAN, Defendant and Respondent.
Law Office of Dean B. Gordon and Dean B. Gordon for Plaintiff and Appellant. James M. Makasian for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 14CECG01039)
OPINION
APPEAL from a judgment of the Superior Court of Fresno County. Lisa M. Gamoian, Judge. Law Office of Dean B. Gordon and Dean B. Gordon for Plaintiff and Appellant. James M. Makasian for Defendant and Respondent.
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Plaintiff Allen Shepherd commenced this action for violation of wage and hour laws against defendant Eddie Honarchian individually and doing business as Eddie's Auto World and In & Out Smog. The main issue in the case was whether plaintiff, a smog technician hired to perform smog checks on automobiles at defendant's place of business, was an employee or an independent contractor. The trial court applied the common law multifactor standard for distinguishing whether plaintiff was an employee or independent contractor and, after weighing the factors relevant to that standard, determined that plaintiff was an independent contractor. In light of that determination, judgment was entered for defendant. Plaintiff appeals. We conclude the legal standard applied by the trial court, while proper in other contexts, was inadequate to resolve the question of whether plaintiff was an employee or independent contractor for purposes of relevant wage and hour laws. Accordingly, we reverse the judgment of the trial court and remand the matter for a new trial under the correct legal standard as set forth by the recent California Supreme Court decision of Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex).
FACTS AND PROCEDURAL HISTORY
Plaintiff's request for judicial notice filed on September 1, 2017, is granted.
Plaintiff's Complaint
On April 14, 2014, plaintiff filed suit against defendant, seeking damages and other statutory remedies under wage and hour laws based on allegations that defendant had, among other things, failed to pay minimum wage and overtime compensation to plaintiff, failed to provide him with meal and rest breaks, and failed to provide wage statements. Plaintiff alleged he worked for defendant performing smog checks on motor vehicles at defendant's place of business. His alleged employment took place from September 12, 2010 through April 30, 2013.
Settled Statement of Evidence Presented at Trial
The case was tried to the court on December 9 and December 14, 2015. No court reporter was present because plaintiff could not afford the cost. In lieu of a reporter's transcript, for purposes of the instant appeal, the parties agreed upon a settled statement on appeal, which was certified by the trial court.
According to the settled statement, defendant testified that from 2010 to 2013, he owned and operated a car sales business, auto repair shop and smog station all at the same business location. He admitted he filed a fictitious business statement for In & Out Smog, and he estimated that smog checks generated about 5 percent of his total revenues. Each party had differing descriptions of the terms on which plaintiff was hired. Defendant testified that in or about September 2010, plaintiff approached him at defendant's business, In & Out Smog, showed defendant his smog technician license, and asked if defendant needed someone to perform smog checks. Defendant testified that plaintiff represented he "was performing smog checks at various smog stations throughout Fresno." According to defendant, in a subsequent conversation with plaintiff it was agreed that plaintiff would be paid $10 cash for each smog check plaintiff performed at defendant's business. Defendant said that plaintiff preferred being paid in cash because he was receiving food stamps and other welfare benefits. While acknowledging that plaintiff performed smog checks at defendant's business from and after September 2010, defendant asserted that until February 2013, when plaintiff became a salaried employee, plaintiff was only present at defendant's business two or three hours per week; allegedly he would come to do the scheduled smog checks and leave when the smog checks were completed.
Defendant owned the critical piece of equipment to conduct smog tests, referred to by the parties as a smog machine (valued at $5,000). Defendant testified that plaintiff used plaintiff's his own timing light and vacuum pump, which tools were valued at less than $100. Plaintiff disputed the latter point, testifying that defendant provided not only the smog machine, but also the timing light and vacuum pump.
The parties were in agreement that in early 2013, plaintiff asked to be put "on the payroll." Defendant testified he did so, and changed plaintiff's classification from independent contractor to employee, in part because plaintiff was by then performing several hours of janitorial service per week. According to defendant, beginning in February 2013, defendant made plaintiff a salaried employee and placed him "on the payroll" at $1,200 per month, plus defendant allegedly continued paying plaintiff $10 for each smog check plaintiff conducted at defendant's place of business. Even with these changes, defendant testified that the longest day plaintiff ever worked was a 5-hour day.
Defendant was asked by plaintiff's counsel whether, if he hired a smog technician as an employee, he would pay him minimum wage, to which defendant responded "of course." Defendant further testified that smog technicians are usually paid $15 to $20 per hour. Defendant conceded that he never provided plaintiff with any paystubs or W-2's for any work that he performed prior to February 2013. Defendant was unable to explain why he paid plaintiff the same amount every month (between February and April 2013) if he was still paying him $10 per vehicle "smogged," since the records of the Bureau of Automotive Repair (BAR) showed the number of smog checks for each pay period varied. Nor could defendant explain how he calculated his payment to plaintiff for the two or three hours of janitorial services allegedly performed each week.
Plaintiff took the stand and disputed much of defendant's testimony. Plaintiff stated that defendant asked him if he wished to be paid in cash or by paycheck, and defendant ended up paying plaintiff $300 in cash every Saturday, which amounted to approximately $5 per hour. Plaintiff denied that defendant ever paid him $10 for each smog check he completed. Plaintiff also testified that, from the very beginning of his work for defendant, he performed janitorial work in addition to doing smog checks. Plaintiff testified that defendant's business—i.e., In & Out Smog (at Sierra and Blackstone)—was a smog certification business, and defendant rarely, if ever, sold any vehicles while plaintiff worked at the site. Plaintiff testified he opened the smog certification business at 7:55 a.m. and closed or locked-up at 6:00 p.m. every day except Sundays during the entirety of his work history at defendant's business. Moreover, plaintiff testified he did not use his own timing light and vacuum pump to perform the smog checks; he never said he was an independent contractor; and he has never operated an independent business as a smog technician. Plaintiff also stated he kept notes on two calendars, writing down how many vehicles he "smogged" each day he worked and the gross revenue from the smog tests he performed. Plaintiff admitted that he was on food stamps when he first started working for defendant, but denied receiving any cash benefits from welfare programs. He admitted he did not report his earnings because he was only receiving about $5 per hour and he needed the food stamps.
Plaintiff testified that after receiving his smog technician's license in 2009, which he said did not teach him anything, he "hung-out" at three different smog certification shops to learn more. He would hang out at Michel's from September 19, 2009 to September 20, 2010; Miramontes from December 1, 2009 to September 20, 2010; and Sunnyskys from January 7, 2010 to June 21, 2010. Plaintiff said he was not paid at these other sites, but he got practical experience on approximately 100 cars during this period. Working for defendant was actually the first time plaintiff was paid for "smog tech" work. Plaintiff noted that when defendant's smog check machine was broken for a short period of time, he had to do smog checks for defendant's business at another location, known as Henry's, but he was not paid any money by Henry for those smog checks.
Plaintiff testified that defendant "gave him the keys to the business on his very first day" he came to work in September 2010. Plaintiff disputed defendant's knowledge of his work hours, since defendant was only "at the business 15 minutes a month."
In addition to the two parties' testimony, Pamela Smith, a paralegal employed by plaintiff's counsel, presented an exhibit showing her estimate of how much plaintiff would be owed if he was found to be an employee, calculating the hours worked based on plaintiff's calendar notes and from discussion with plaintiff. Her initial calculations showed wages owed of $33,244. Smith also had cross-referenced her calculations with a certified copy of plaintiff's "Technician Access History from the California Bureau of Automotive Repair," which she had reviewed. She testified the BAR records "did not show that [plaintiff] ever performed any smog checks for Michel's Smog Check, Miramontes Smog Check, or Sunnysky's Smog during the period that he worked for [defendant]," which she assumed was from September 20, 2010 to April 30, 2013. The BAR records, which were admitted into evidence, showed that the only smog checks plaintiff performed for Henry's Automotive were between January 4, 2013 and January 7, 2013.
The BAR records appear to show plaintiff had access to Michel's Smog Check and Miramontes Smog Check through September 20, 2010.
On December 14, 2015, after concluding the presentation of evidence, the parties rested. Closing statements were made to the trial court, and the court then took the matter under submission.
Trial Court's Statement of Decision
On March 2, 2016, the trial court took the matter out from under submission and issued its written "Statement of Decision and Judgment" (the statement of decision). The statement of decision noted that it was not disputed between the parties that after plaintiff was hired to perform janitorial services in February 2013, the relationship of the parties was that of employee/employer. However, "[a]s to the nature of the relationship from September 2010 to February 2013, the parties are in disagreement." After summarizing the testimony at trial, the trial court's statement of decision indicated the standard that would be applied for deciding whether plaintiff was an employee or independent contractor was that of S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello), in the format provided by the California Judicial Council of California's civil jury instruction No. 3704 (or CACI No. 3704). The multifactor Borello approach is also sometimes referred to as the common law test or standard. Under that test, as set forth by the trial court, the trial court weighed and considered numerous factors (listed in the statement of decision as factors (a) through (j)), with the most important factor being whether defendant had the right to control how plaintiff performed the work.
In Dynamex, supra, 4 Cal.5th at p. 934, the Supreme Court noted that the case of Borello, supra, 48 Cal.3d 341, has sometimes been referred to as the common law test or standard for distinguishing employees from independent contractors. (See also Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 530-531 [noting the "common law test" was discussed most recently at length in Borello].)
In its statement of decision, the trial court proceeded to analyze the facts shown at trial through the lens of the various Borello factors. The trial court found defendant owned "the state-issued machine upon which smog checks are mandated to be performed," but noted at the same time there was evidence plaintiff supplied a few "more personalized equipment items," such as a timing light and vacuum. The trial court found plaintiff was paid by the job, rather than hourly, and that plaintiff had "performed smog tests for three other unrelated businesses," some of which had apparently overlapped with his work association with defendant. Additionally, the trial court found plaintiff's work of performing smog tests was not directed or supervised by defendant, and that "[d]efendant gave Plaintiff keys to the business to come and go as Plaintiff saw fit." The trial court also indicated the relationship was at will since either party was free to terminate the relationship without any prior notice. On these findings, and upon weighing the numerous factors of the common law test, the trial court held the legal presumption plaintiff was an employee had been rebutted. The trial court concluded: "During the time period from September 2010 through January 2013, ... the Court finds that Plaintiff was an independent contractor." (Italics added.)
It is not clear whether the trial court understood that, under the common law test in which control is the most important factor, the presence of an at will relationship is considered to be strong evidence of the necessary right to control. (Ayala v. Antelope Valley Newspapers, Inc., supra, 59 Cal.4th at p. 531.) As stated in Borello, supra, 48 Cal.3d at p. 350: " '[S]trong evidence in support of an employment relationship is the right to discharge at will, without cause.' [Citation.]"
There was a remaining issue in the case of whether, after plaintiff became an employee on payroll in February 2013, he was adequately or fully paid for work performed in accordance with minimum wage and overtime laws. On that issue, the trial court concluded the evidence was insufficient to show a minimum wage violation or that plaintiff had worked any overtime hours during that time frame.
Judgment and Notice of Appeal
On March 2, 2016, based on the trial court's statement of decision, the trial court entered judgment for defendant on all causes of action. Plaintiff filed a timely notice of appeal on April 1, 2016.
The Initial Briefing on Appeal and Plaintiff's Supplemental Brief
Plaintiff's opening and reply briefs in the present appeal include contentions that the trial court erred by failing to correctly apply the law to the facts, or in any event substantial evidence did not support the trial court's conclusion that plaintiff was an independent contractor. The briefing by plaintiff emphasizes the broad definition of what it means to employ someone for purposes of wage and hour laws, which broad definition would include " '(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship,' " quoting Martinez v. Combs (2010) 49 Cal.4th 35, 64. Plaintiff's reply brief also argues the trial court failed to consider the difference between a proprietor's lack of exercise of control over a worker's job performance, and the existence of a retained right to exercise such control, the latter being the more significant factor, citing Ayala v. Antelope Valley Newspapers, Inc., supra, 59 Cal.4th 522, 533.
Defendant's brief as respondent in the present appeal does not disagree with the general legal principles recited by plaintiff, but argues they do not give this court the ability to reweigh the evidence. Rather, defendant's position is the trial court applied the standard in Borello, weighed and considered all the relevant factors, and reached a rational conclusion that was supported by substantial evidence in the record. Since there was substantial evidence to support the judgment, defendant argues the instant appeal is without merit.
On May 2, 2018, while this appeal was pending but after the regular briefing was completed, plaintiff applied to this court for permission to file a supplemental brief to address the impact of the Supreme Court's recent decision in Dynamex, supra, 4 Cal.5th 903, which plaintiff argued clarified existing law regarding the standard to be applied for determining whether a worker is an employee or independent contractor for purposes of wage and hour laws. Plaintiff's application stated, "Dynamex is declarative of existing law and its consideration by this Court is appropriate in deciding this appeal."
On May 4, 2018, we granted plaintiff's request to file such a supplemental brief to address the Dynamex opinion's impact on the present appeal. In our order granting plaintiff's request, we also expressly gave to defendant/respondent the opportunity to file its own supplemental brief within 30 days from the date of our order.
On May 4, 2018, plaintiff filed his supplemental brief with this court. Plaintiff's supplemental brief pointed out that in Dynamex, the Supreme Court definitively ruled on and clarified the appropriate standard for discerning whether a worker is an employee or an independent contractor in wage and hour cases, and consequently, plaintiff insisted the Dynamex standard be applied in the present appeal. As explained in our discussion section that follows below, the standard adopted by the Supreme Court in Dynamex differs in substantial ways from the common law multifactor test applied by the trial court here. In his supplemental brief, plaintiff urges that we either (i) apply the Dynamex standard ourselves, in the present appeal, and decide plaintiff's status (as employee or independent contractor) under that standard, or (ii) remand the matter to the trial court for a new trial to permit the trial court to apply the Dynamex standard. As indicated by our disposition herein, we will take the latter approach.
Although given an opportunity to do so by this court, defendant has failed to file any supplemental brief to address the impact of Dynamex on this appeal.
DISCUSSION
I. Standard of Review
The trial court's determination of employee or independent contractor status is an issue of fact that is ordinarily affirmed on appeal if supported by substantial evidence. (Espejo v. The Copley Press, Inc. (2017) 13 Cal.App.5th 329, 342.) The factual issue is treated as an issue of law only if the evidence is undisputed. (Id. at pp. 342-343.) However, the trial court's selection of the appropriate rule or legal standard to be applied in a particular case is a question of law that is reviewed independently. (Air Couriers Internat. v. Employment Development Dept. (2007) 150 Cal.App.4th 923, 932; see 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 271.)
II. Legal Standard for Whether Plaintiff is an Employee or Independent Contractor
Before we consider the legal standard set forth in Dynamex for determining whether a worker is an employee or independent contractor in a wage and hour case, we begin by first summarizing, as necessary background, the multifactor test embodied in Borello, which has sometimes been referred to by the Supreme Court as the common law test. (See Dynamex, supra, 4 Cal.5th at p. 934.) A. Borello's Multifactor Standard
The precise issue in Borello was whether farmworkers hired by a grower to harvest cucumbers under a written "sharefarmer" agreement were independent contractors or employees for purposes of California's workers' compensation statutes. (Borello, supra, 48 Cal.3d at p. 345.) The grower in that case argued the farmworkers were independent contractors under the control of details test because, among other things, the grower did not supervise the picking but compensated the farmworkers based on the amount of cucumbers they harvested, and the workers agreed they were not employees. (Ibid.) Borello rejected the grower's contentions. In summarizing its conclusions in the introductory paragraphs of the opinion, Borello stated the grower retained the right to control all the agricultural operations on its premises even though it chose to accomplish one integrated step in the production of one crop by means of worker incentives rather than direct supervision. Furthermore, Borello held the harvesters' work followed "the usual line" of an employee: "In no practical sense are the 'sharefarmers' entrepreneurs operating independent businesses for their own accounts; they and their families are obvious members of the broad class to which workers' compensation protection is intended to apply." (Borello, supra, 48 Cal.3d at p. 345.)
In so holding, Borello undertook an extensive analysis to articulate the proper standard to be applied in deciding whether the workers were independent contractors or employees. Borello began its discussion by noting that, historically speaking, the distinction between independent contractors and employees arose in the context of tort law to decide whether vicarious liability should be applied against the principal. Thus, the control-of-work-details test became the most significant consideration under the common law, and California cases have followed that approach. (Borello, supra, 48 Cal.3d at p. 350.)
However, as further explained in Borello, "the courts have long recognized that the 'control' test, applied rigidly and in isolation, is often of little use in evaluating the infinite variety of service arrangements. While conceding that the right to control work details is the 'most important' or 'most significant' consideration, the authorities also endorse several 'secondary' indicia of the nature of a service relationship." (Borello, supra, 48 Cal.3d at p. 350.) Borello then listed the following factors to be considered in addition to that of control of work details: "(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee." (Id. at p. 351.) Borello noted that such factors should not be applied mechanically or in isolation; they are intertwined, and their weight should be considered on a case-by-case basis. (Ibid.)
Finally, in addition to the factors outlined above, Borello emphasized that when a court is called upon to decide whether a worker is an employee or independent contractor for purposes of protective social welfare legislation, as was the case in Borello (i.e., workers' compensation statute), the remedial purposes of the statute must be considered: "[T]he 'control-of-work-details' test for determining whether a person rendering service to another is an 'employee' or an excluded 'independent contractor' must be applied with deference to the purposes of the protective legislation. The nature of the work, and the overall arrangement between the parties, must be examined to determine whether they come within the 'history and fundamental purposes' of the statute. [Citation.]" (Borello, supra, 48 Cal.3d at pp. 353-354.) Applying this principle to the context of the workers' compensation statute, the Supreme Court stated: "[T]he concept of 'employment' embodied in the Act is not inherently limited by common law principles. We have acknowledged that the Act's definition of the employment relationship must be construed with particular reference to the 'history and fundamental purposes' of the statute." (Borello, at p. 351.) "While the common law tests were developed to define an employer's liability for injuries caused by his employee, 'the basic inquiry in compensation law involves which injuries to the employee should be insured against by the employer. [Citations.]' " (Id. at p. 352.)
Borello's overall approach, which includes the control-of-work factor along with multiple secondary factors, and which requires consideration of the scope and purposes of protective legislation, has been referred to as the common law test. (See Ayala v. Antelope Valley Newspapers, Inc., supra, 59 Cal.4th at pp. 530-531; see Duffey v. Tender Heart Home Care Agency, LLC (2019) 31 Cal.App.5th 232, 237.) As noted, this was the exclusive test applied by the trial court below. B. Martinez case
We briefly mention the case of Martinez v. Combs, supra, 49 Cal.4th 35 (Martinez) because it provides an important transition to the analysis used in the Dynamex case. Although Martinez did not involve workers who were allegedly independent contractors, the opinion provided an analysis of the definition of employ or employment for purposes of wage and hour statutory protections. Martinez held that wage orders issued by the Industrial Welfare Commission (IWC) were intended by the Legislature to be applicable in defining "employ" and "employer" for purposes of an action for recovery of minimum and overtime wages under Labor Code section 1194. (Martinez, supra, 49 Cal.4th at pp. 64, 66.) IWC wage orders impose obligations relating to minimum wages, maximum hours, and a limited number of very basic working conditions of California employees (e.g., meal and rest breaks) in various industries. Labor Code section 1194 is an enforcement provision for the protections stated in the wage orders, and the wage order definitional provisions are clearly applicable to such wage and hour claims. (Martinez, supra, at pp. 56-57, 62.) In Martinez, the Supreme Court reviewed the IWC's wage orders and held that they encompass three alternative definitions of "employ." (Id. at p. 64.) "To employ, then, under the IWC's definition, has three alternative definitions. It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship." (Martinez, at p. 64.)
In California, wage orders are constitutionally authorized, quasi-legislative regulations that have the force of law. (Dynamex, supra, 4 Cal.5th at pp. 913-914 & fn. 3.) Today, 18 wage orders are in effect, 16 covering specific industries and occupations, one covering all employees not covered by an industry or occupation order, and a general minimum wage order amending all others to conform to the amount of the minimum wage currently set by statute. (Martinez, supra, 49 Cal.4th at p. 57.)
The same definitional wording is contained in the various wage orders. In Martinez, the wage order at issue was Wage Order No. 14-2001. (Martinez, supra, 49 Cal.4th at pp. 49-50.) In the present case, plaintiff alleged a violation of Wage Order No. 4-2001, which relates to wages, hours and working conditions in professional, technical, clerical or mechanical occupations. (See Cal. Code Regs., tit. 8, § 11040.)
The third definition, which defines "employ" to mean "engage," serves to incorporate the common law definition of employment as one of the alternative definitions. (Martinez, supra, 49 Cal.4th at p. 64.) However, Martinez emphasized the importance of not limiting the meaning and scope of employment to only the common law definition for purposes of the IWC's wage orders, declaring that "ignoring the rest of the IWC's broad regulatory definition would substantially impair the commission's authority and the effectiveness of its wage orders.... [¶] Were we to define employment exclusively according to the common law in civil actions for unpaid wages we would render the commission's definitions effectively meaningless." (Id. at p. 65.) By far the broadest definition of "employ" under the wage orders is to "suffer or permit to work." (Id. at pp. 57-58.) It was understood to reach irregular working arrangements that fell outside the common law master and servant relationship. (Id. at pp. 58, 65.) "A proprietor who knows that persons are working in his or her business without having been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so." (Id. at p. 69.) C. Dynamex Standard
Dynamex addressed the question of whether the wage order definitions of "employ" and "employer" discussed in Martinez were applicable to determining whether a worker is properly considered an employee or an independent contractor for purposes of the protection of wage and hour laws. (Dynamex, supra, 4 Cal.5th 903, 916.) In Dynamex, workers brought a class action under wage and hour laws claiming that the employer, Dynamex, had misclassified them as independent contractors to avoid paying minimum wages and overtime. The trial court rejected Dynamex's contention that, in the wage and hour context, the multifactor standard set forth in Borello was the exclusive and controlling standard under California law for distinguishing employees and independent contractors. Instead, the trial court applied the broader "suffer or permit to work" definition of employ pursuant to the wage order definitions. The Court of Appeal affirmed the trial court's approach. On review, the Supreme Court likewise affirmed, concluding the trial court properly used the "suffer or permit to work" definition of employment from Martinez, rather than the Borello test, in its evaluation of whether the workers in question were employees or independent contractors for purposes of wage and hour laws. (Dynamex, at pp. 914-916.) As the Supreme Court explained, "the suffer or permit to work standard is relevant and significant in assessing the scope of the category of workers that the wage order was intended to protect. The standard is useful in determining who should properly be treated as covered employees, rather than excluded independent contractors, for purposes of the obligations imposed by the wage order." (Id. at p. 950.)
Dynamex then explained the broad scope of the suffer or permit to work definition of employment under wage orders. "[I]n light of its history and purpose, we conclude that the wage order's suffer or permit to work definition must be interpreted broadly to treat as 'employees,' and thereby provide the wage order's protection to, all workers who would ordinarily be viewed as working in the hiring business. At the same time, we conclude that the suffer or permit to work definition is a term of art that cannot be interpreted literally in a manner that would encompass within the employee category the type of individual workers, like independent plumbers or electricians, who have traditionally been viewed as genuine independent contractors who are working only in their own independent business." (Dynamex, supra, 4 Cal.5th at p. 916; see id. at p. 953.)
To fulfill these objectives, the Supreme Court formulated a specific test for applying the suffer or permit to work definition of employment. Eschewing use of a multifactor test such as Borello, the Supreme Court adopted a more structured and definite standard—referred to as the "ABC test"—to ascertain whether a worker is an employee or independent contractor for purposes of wage and hour laws under the suffer or permit to work definition. (Dynamex, supra, 4 Cal.5th at pp. 916-917, 954-956.) "[W]e conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the 'ABC' test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (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 such 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 the work performed for the hiring entity." (Id. at pp. 916-917; see id. at pp. 954-956.)
The Supreme Court explained that this ABC test would avoid some of the disadvantages of relying on a multifactor standard such as Borello: "We find merit in the concerns ... regarding the disadvantages, particularly in the wage and hour context, inherent in relying upon a multifactor, all the circumstances standard for distinguishing between employees and independent contractors. As a consequence, we conclude it is appropriate, and most consistent with the history and purpose of the suffer or permit to work standard in California's wage orders, to interpret that standard as: (1) placing the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order's coverage; and (2) requiring the hiring entity, in order to meet this burden, to establish each of the three factors embodied in the ABC test—namely (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 for the performance of the work 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, supra, 4 Cal.5th at pp. 956-957, fn. omitted.) The hiring entity's failure to prove any one of the three prerequisites "will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order." (Id. at p. 964.)
The Supreme Court concluded that "this interpretation of the suffer or permit to work standard is faithful to its history and to the fundamental purpose of the wage orders and will provide greater clarity and consistency, and less opportunity for manipulation, than a test or standard that invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis." (Dynamex, supra, 4 Cal.5th at p. 964.) The remainder of the Dynamex opinion provides further elaboration of the meaning of each element of the ABC test. (Id. at pp. 958-963.)
III. Trial Court Did Not Apply Correct Standard
Here, in reaching its decision that plaintiff was an independent contractor, the trial court applied only the multifactor Borello standard. As our discussion hereinabove makes clear, that was not an adequate legal standard for deciding whether plaintiff was an employee or independent contractor for purposes of this action under wage and hour laws. Rather, the broader suffer or permit to work definition of employment under the relevant wage orders should have been used by the trial court in this context, as outlined in Dynamex. Moreover, as Dynamex has made clear, the proper standard for applying the suffer or permit to work definition is the ABC test, as set forth and explained in Dynamex.
At the time of the trial court's decision, although Dynamex had not yet been decided, the Martinez decision had strongly indicated that the broader definition of employ or employment found in the IWC's wage orders would be applicable in this context, rather than the multifactor Borello test.
Because the trial court applied an inadequate legal standard to determine whether plaintiff was an employee or independent contractor in this wage and hour case, we reverse the judgment of the trial court and remand the case back to the trial court for a new trial, with the trial court directed to apply the Dynamex ABC test. (See Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558, 561 (Garcia) [judgment reversed where failure to apply Dynamex standard on summary judgment motion].)
The general rule is that judicial decisions are given retroactive effect. (Garcia, supra, 28 Cal.App.5th at p. 572, fn. 12.) Plaintiff's supplemental brief to this court implicitly assumed that Dynamex must be applied retroactively, but defendant failed to respond or file any supplemental brief of its own concerning the impact of Dynamex, despite being given the opportunity to do so by this court. Defendant's failure forfeited the opportunity to challenge in this appeal the retroactivity of Dynamex. Consequently, as the Court of Appeal did in Garcia, we apply Dynamex under the general rule, but find it unnecessary to address retroactivity in any broader or more definitive sense. (Garcia, at p. 572, fn. 12.)
IV. Compensation Issues After February of 2013
The parties agreed that during the period from February 2013 to April 30, 2013, plaintiff's status was an employee on defendant's payroll. Defendant testified he paid plaintiff a salary of $1,200 per month during that period. According to defendant, he also continued to pay plaintiff $10 for each smog check plaintiff conducted at defendant's place of business. In its statement of decision, the trial court credited defendant's testimony about the number of hours plaintiff ordinarily worked. On that basis, and considering the $1,200 per month salary, no minimum wage or overtime violation was found by the trial court.
Plaintiff contends the trial court erred by addressing only a narrow portion of plaintiff's overall claim. We agree. As plaintiff notes, defendant testified that he was continuing to pay plaintiff $10 per smog check, but the BAR records show that plaintiff smog checked approximately 813 vehicles during that three-month period. That would mean he was entitled to $8,130 for vehicles that were smog checked from February 1, 2013 to April 30, 2013, but he was paid considerably less than that (i.e., $3,300). The trial court apparently failed to consider the totality of plaintiff's claim for unpaid or underpaid wages during this three-month period. Furthermore, we note it is also unclear on this record whether the trial court's conclusion under the improperly applied Borello standard (that plaintiff was an independent contractor) may have led it to disregard the $10 per car aspect of plaintiff's compensation.
In presenting this matter, plaintiff may have made a minor miscalculation in the total number of vehicles that were smog checked during the three-month period of February 1, 2013 to April 30, 2013. That is, it appears the number referred to by plaintiff of 813 vehicles inadvertently included approximately 36 vehicles tested by plaintiff during the last several days of January 2013. Any such miscalculation does not diminish the overall validity of the point raised by plaintiff. --------
For all these reasons, we conclude it is appropriate to grant a new trial on all issues, including the issue of wage, hour and compensation claims for the period of February 2013 to April 30, 2013.
DISPOSITION
The judgment of the trial court is reversed, and the matter is remanded to the trial court for a new trial on all issues, with the trial court directed to apply the standard in Dynamex, supra, 4 Cal.5th 903 (including the ABC test explained therein) for determining whether plaintiff was an employee or independent contractor. Plaintiff shall recover costs on appeal.
/s/_________
LEVY, Acting P.J. WE CONCUR: /s/_________
FRANSON, J. /s/_________
DE SANTOS, J.