DYNAMEX OPERATIONS WEST v. S.C.Amicus Curiae Brief of Chamber of Commerce of the United States of America and California Chamber of CommerceCal.December 10, 2015 SUPREME COURT (GRY:arone comaa ISTRICT ATTORNEY REQUIRED BY BUS. & PROF. CODE, §17209 AND CAL. RULES OF COURT, RULE 8.212(c). IN THE COPY SUPREME COURT OF CALTFORMEAWEcourt DEC 4 9 2015 “—— T 9222732 DYNAMEX OPERATIONSWEST,INC., Petitioner, Frank A. McGuire Clerk Uv. Deputy THE SUPERIOR COURTOF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES, Respondent, CHARLESLEEetal. Real Parties in Interest. ON REVIEW FROM A DECISION BY THE COURT OF APPEAL, SECOND APPELLATE DISTRICT, DIVISION SEVEN ° CASE No. B249546 APPLICATION FOR LEAVE TO FILE AMICI CURIAE BRIEF; AMICI CURIAE BRIEF OF CHAMBER OF COMMERCEOF THE UNITED STATES OF AMERICA AND CALIFORNIA CHAMBER OF COMMERCEIN SUPPORT OF PETITIONER DYNAMEX OPERATIONSWEST,INC. HORVITZ & LEVY LLP *JOHN A. TAYLOR,JR.(BAR No. 129333) JEREMY B. ROSEN(Bar No. 192473) FELIX SHAFIR (BAR No. 207372) DAVID W. MORESHEAD(Bar No. 305362) 15760 VENTURA BOULEVARD, 18TH FLOOR ENCINO, CALIFORNIA 91436-3000 (818) 995-0800 + FAX: (818) 995-3157 jtaylor@horvitzlevy.com jrosen@horvitzlevy.com fshafir@horvitzlevy.com dmoreshead@horvitzlevy.com ATTORNEYS FOR AMICI CURIAE CHAMBER OF COMMERCEOF THE UNITED STATESOF AMERICA; CALIFORNIA CHAMBER OF COMMERCE TABLE OF CONTENTS Page TABLE OF AUTHORITIES0.00... cceesssneceeeseeeeesteessesseeeensiil APPLICATION FOR LEAVE TO FILE AMICI CURIAE BRIEF OF CHAMBER OF COMMERCEOF THE UNITED STATES OF AMERICA AND CALIFORNIA CHAMBER OF COMMERCE IN SUPPORT OF PETITIONER DYNAMEX OPERATIONS WEST, INC, ooo... eeeeesceesceceeeseeeeeeeeenseeenseeesasees 1 AMICI CURIAE BRIEP o.oo.eeeeceeceeeeeeneeeseeeeesesteeeeeesseenseeens 6 INTRODUCTION...ceeceneeeseeeaeeeseneeeeesseseneeeesseesseeeseenes 6 LEGAL ARGUMENT.00ecceccceeeseeeeeeseeeeeeeeeeneeessneeseseeeeenes 9 I. INDEPENDENT CONTRACTORS ARE ESSENTIAL I. TO A FUNCTIONING BUSINESS ENVIRONMENT AND TO CALIFORNIA’S ECONOMIC PROSPERITY....... 9 A. The history and developmentofthe independent contractor relationship. ..................ccscccceeeessesesesesseeesenes 9 B. The current prevalence of independent (60)019=610) 10 C. Common misconceptions regarding the classification of workers as independent CONTLACCOLS. 2.0.0... cececceesceecccsesseeeceecceesceecascseecceeseeenaess 13 D. The economic benefits of independent contractors in a fluctuating employment market...................00... 16 E. The negative consequences of curtailing the availability of independent contractors. ................... 18 IN DETERMINING EMPLOYMENT STATUS, THE WAGE ORDER TESTS CAN AND SHOULD BE HARMONIZED WITH BORELLO’'S COMMON LAW weve 20TEST. oooeeeeeeeeeseeeeeneeeceseeseeeeeeseeecescnaeeeeeeesseeeneees A. Thedisruption of long-settled jurisprudence can be avoidedbyclarifying that the alternative IWC tests are not meaningfully different in application from Borello’s commonlawtest............. 20 B. The application of the IWC’s three tests in Martinez confirms that the “right of control” is the determinative consideration underlyingall three tests, as it is under Borello’s common law COSE.eeeeee eeccceeeeeeceeeeeesceesnenseeeueeeeaesaesaecessseeceeneaes 22 C. Inpost-Martinez cases, the California and federal courts have focused on the right of control to conclude the sameresult is required regardless whichtest is applied.................ccccceeeccceeeeeesessecseesseees 30 CONCLUSION.........cccccccccccsssssenessssssseeecssseccessssessseeesesetseeeseeeneees 35 CERTIFICATE OF WORD COUNT............cccccceeseseccssseseeeceeeeene 36 li TABLE OF AUTHORITIES Page(s) Cases Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176 ........ciccceecccccseecccceceeveeesesscesenees 32 Arredondo v. Delano Farms Co. (E.D.Cal. 2013) 922 F.Supp.2d 1071occccecescceeeeees 34 Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522 ooceeccceceecceeeeecesenenenes 3, 24, 26, 29 Bennett v. Truebody (1885) 66 Cal. 509.0... cecccceeseeseensteeesde deeeaaaaeesseeeeeseseesensens 10 Bernauer v. Hartman Steel Co. (1889) 33 ILApp. 491] ..ccccccsccscscescesseesseessessessesscecstessessesseeseasesees 10 Betancourt v. Advantage Human Resourcing, Inc. (N.D.Cal., Sept. 3, 2014, No. 14-cv-01788-JST) 2014 WL 4865074...a esucaacaccessceeceecceeeceeeeeseecessessuaeeecess 33 Braboy v. Staples, Inc. (N.D.Cal., Feb. 24, 2011, No. C 09-4534 PJH) 2011 WL 748189 0... ccccccsscccccccescceccceeccececesssscuseeecaussessssecsusesteeceeesens 33 Bradley v. Networkers Internat., LLC (2012) 211 Cal.App.4th 1129 oo...eeeccceeeeessserseceeeeees 31, 34 Casperson v. Michaels (1911) 142 Ky. 314 [1384 S.W. 200] .000.ceeeeeeessseseerereee 26 Castaneda v. Ensign Group, Inc. (2014) 229 Cal.App.4th 1015 o......cccccceceeeeeeeeeeesesessceceeeeeeens 31 Curtis & Gartside Co. v. Pigg (1913) 39 Okla. 31 [184 P. 1125)...eeseeeceeeeeees 25 Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419 oo... cccccceeceesseceseesessseceeseenens 32 il Hammitt v. Lumber Liquidators, Inc. (S.D.Cal. 2014) 19 F.Supp.3d 989...ceceeesesseceseseeees 33 Hilliard v. Richardson (1855) 69 Mass. 349...ccc eccccescccssscccescesceseusasaaessaueeceeeeeceneeees 10 Lazaro v. Lomarey Inc. (N.D.Cal., Feb. 21, 2012, No. C-09-02013 RMW) 2012 WL 566840 00.0... cccccccccccceeecesesssssssnenseeseeeeeesesssesssnsaeaanes 34 Martinez v. Antique & Salvage Liquidators, Inc. (N.D.Cal., Feb. 8, 2011, No. C09-00997 HRL) 2011 WL 500029uo.eeeecececccccceeessessesssssceececcccceccsseceeeeeeneeescseueseresers 33 Martinez v. Combs (2010) 49 Cal.4th 35 oo.eccccccccsssceeeceeeecesseseeesesesseeees passim Ochoa v. McDonald’s Corp. (N.D.Cal., Sept. 25, 2015, No. 14-cv-02098-JD) 2015 WL 5654858occceeesccccccececseeececseeteeesseeeeseseseeecesesceaeas 33 Purtell v. Philadelphia & Reading Coal & Iron Co. (1912) 256 TI]. 110 [99 N.E. 899]...ccccccceeeeeeeresetenseesees 26 Rodriguez v. SGLC, Inc. (K.D.Cal., July 23, 2010, No. 2:08-cv-01971-MCE- KIN) 2010 WL 2943128 ooocceccecssscesseccsusssssseceeeceeaaes 33 S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341...ccccssssssssrssssseeseeseseesstsenes passim Sotelo v. MediaNews Group, Inc. (2012) 207 Cal-App.4th 639 ..cccccccsccccssssssesssesssesseccssessseccssesseeee 32 Taylor v. Waddell & Reed Inc. (S.D.Cal., Feb. 1, 2013, No. 09-cv-02909 AJB (WVG)) 2013 WL 485907 0.0... ccccseseeseeeeccececceceesssnsesessenees 33 Vasquez v. Wells Fargo Bank, National Association (N.D.Cal. 2015) 77 F.Supp.3d 911...eaeeeeceeeeeeees 32 1v Statutes Labor Code § 1194cccccccccessessseeesssseeeeeceeesseeeseesseeeeeeeseeeeeeeeeseeess 3, 23 Rules of Court Cal. Rules of Court atlots)A0](9rr1 YUle 8.52O(£)(A) occ cccccccccessssssessesssssseesnsssseeseeeeseeeessseeesccecsessanaaes 2 Miscellaneous Barton, Reconciling the Independent Contractor Versus Employee Dilemma: A Discussion of Current Developments as They Relate to Employee Benefit Plans (2001) 29 Cap. U. L.Rev. 1079................008. 16, 17 Bauer, The Misclassification of Independent Contractors: The Fifty-Four Billion Dollar Problem (2015) 12 Rutgers J.L. & Pub. Pol'y 138 ......0..ceceeee 18 1 Blackstone’s Commentaries.............ccccccscccceccectccesccescenccteccasceascecs 9 Buscaglia, Crafting Legislative Solution to the Economic Harm of Employee Misclassification (2009) 9 U.C. Davis Bus. Lid. 111... cccccccceceeeeeeeeerensnees 10 Carlson, Why the Law Still Can't Tell an Employee When It Sees One and How It Ought to Stop Trying (2001) 22 Berkeley J. Emp. & Lab. L. 295............... 9, 10 Cohen and Eimicke, Independent Contracting Policy and Management Analysis (Aug. 2013) Columbia University's School of International Affairs.......... 14, 15, 16, 19 Comment, The Employee/Independent Contractor Classification: Do Loan Officers Working with California Mortgage Brokers Qualify as Statutory Independent Contractors (1995) 32 San Diego L.Rev. 895 .......cccccccccsssscscesecessessneeeeessnneeeesssesssseseaees 14, 16, 17, 19 Comment, The New Traditional Employment Relationship: An Examination of Proposed Legal and Structural Reforms for Contingent Workers from the Perspectives of Involuntary Impermanent Workers and Those Who Employ Them (2003) 43 Santa Clara L.Rev. 901 ......cccccccccccccsssssseecceeeesessssseeeceeceeeeeeeeees 13 Eisenach, The Role of Independent Contractors in the U.S. Economy (Dec. 2010) ............cccccccccceeeeees 12, 18, 14, 17, 18, 19 Harnedet al., Creating a Workable Legal Standard for Defining an Independent Contractor (2010) 4 J. Bus. Entrepreneurship & L. 98 ............ccccecccccessseeseeseseeeens 15, 18 Kundaet al., Why Do Contractors Contract? The Experience of Highly Skilled Technical Professionals in a Contingent Labor Market (2002) 55 Indus. & Lab. Rel. Rev. 234.00...ceceeescesceseneees 12, 15 NFIB, National Small BusinessPoll, Independent Contractors (2008) vol. 8, issue 6 oo. ccccccccccccccccececeseeeessseens 12, 18, 19 Note, Employees Versus Independent Contractors: Why States Should Not Enact Statutes That Target the Construction Industry (2018) 39 J. Legis. 295 .......ccccccccccsssesceseessnstecsecceceseeeeceaesesesesecsecsecesesseuseauessess 19 Pew Research Center, Take this Job and Love It (Sept. 17, 2009) ..............ccccccccccseseeeeeee 14 Polivka, Into contingent and alternative employment: by choice? (1996) 119 Monthly Lab. Rev. 55 ..........ccccccccccsssesseeseseecseeeseeceesseees 13, 14, 15 U.S. Dept. of Labor, Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements (2005) .........0000... 11, 13 U.S. Govt. Accountability Office, Contingent Workforce: Size, Characteristics, Earnings, and Benefits (Apr. 2015) http://goo.gl/GjmQRz...............ccccceseeeeeeees 11 vl U.S. Govt. Accountability Office, Employment Arrangements: Improved Outreach Could Help Ensure Proper WorkerClassification (July 2006) 0.0... cccceccccccccccccesssssseceesceeserseseneesenssess 11 Vil IN THE SUPREME COURT OF CALIFORNIA DYNAMEX OPERATIONS WEST,INC., Petitioner, v. THE SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES, Respondent, CHARLESLEEetal. Real Parties in Interest. APPLICATION FOR LEAVETO FILE AMICI CURIAE BRIEF OF CHAMBER OF COMMERCEOF THE UNITED STATES OF AMERICA AND CALIFORNIA CHAMBER OF COMMERCE IN SUPPORT OF PETITIONER DYNAMEX OPERATIONSWEST,INC. Pursuant to California Rules of Court, rule 8.520(f), the Chamber of Commerce of the United States of America (U.S. Chamber) and the California Chamber of Commerce (CalChamber) respectfully request permission to file the attached amici curiae brief in support of defendant and petitioner Dynamex Operations West, Inc. (Dynamex). The U.S. Chamber is the world’s largest federation of business, trade, and professional organizations, representing 300,000 direct membersandindirectly representing theinterests of more than three million businesses andcorporationsof every size, from every sector, and in every geographic region of the country.! In particular, the U.S. Chamber has many memberslocated in California and others who conductsubstantial businessin the State and have a significant interest in the sound and equitable development of California employment law. The U.S. Chamber routinely advocatesfor the interests of the business communityin courts across the nation by filing amicus curiae briefs in cases involving issues of similar vital concern. In fulfilling that role, the USS. Chamber has appeared many times before this Court, the California Courts ofAppeal, the United States Supreme Court, and the supremecourts of various otherstates. CalChamberis a non-profit business association with over 13,000 members, both individual and corporate, representing virtually every economicinterestin the state of California. For over 100 years, CalChamberhas beenthevoice of California business. While CalChamberrepresents severalofthe largest corporations in California, 75 percent of its members have 100 or fewer employees. CalChamberacts on behalf of the business community to improve the state’s economic andjobs climate by representing business on a 1 The U.S. Chamber and CalChambercertify that no person or entity other than the U.S. Chamber, CalChamber, and their counsel authored this proposedbrief in whole orin part and that no person or entity other than the U.S. Chamber, CalChamber, their members, or their counsel made any monetary contribution intended to fund the preparation or submission of the proposed brief. (See Cal. Rules of Court, rule 8.520(f)(4).) broad range of legislative, regulatory, and legal issues. CalChamberoften advocates before the state and federal courts by filing amicuscuriaebriefs in cases,like this one, involving issues of paramountconcern to the business community. Every California businesshasa critical interest in whom it is deemed to employ, and under what circumstances it may deal with sole proprietors and other service providers as independent contractors. For more than a century, California courts and administrative agencies have answered these questions by looking exclusively to the common law, as summarized by this Court in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello), to determine the employee or independentcontractor status of workers. The key factor underthe common law test for determining employment, as elucidated in Borello, has traditionally been theright to control the manner and means by which the workis to be performed. In Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), this Court held that, in determining whichof several possible employers were subject to suit by employeesfor unpaid minimum wages under Labor Code section 1194, the persons who maybeliable as joint employers should be determined underthe definitionsof“employer” set by the Industrial Welfare Commission (IWC) in wage orders dating back nearly a century. But until it granted review here, this Court had “le[ft] for another day” the question whetherthese wage order tests for employer status also govern the determination of employee status. (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 530-531.) The U.S. Chamber and CalChamberagree with and support Dynamex’s position that the trial court and the Court of Appeal erred in concluding that the IWC wage order tests should apply beyond the joint employment context addressed by Martinez to extend to cases where workers challenge their independent contractor status. As Dynamex explained in its briefing on the merits, these wage order tests as applied by the trial court and the Court of Appeal—andin particular the “suffer or permit” test as interpreted by the trial court—would effectively eliminate independent contractor status in California. Should this Court disagree with Dynamex’s position, however, and conclude that the IWC wage order tests do govern the assessment of whether workers are employees rather than independentcontractors, then the U.S. Chamber and CalChamber believe their amici curiae brief can assist this Court by offering a different perspective on how the IWC wageordertests should be properly applied in future cases. In short, in the event this Court decides to apply the wage order tests beyond the context of joint employment status, this Court can benefit from the additional briefing here showingthat, when properly interpreted and applied, the IWC’s two alternatives to the common law test are not meaningfully different from the common law test explicated in Borello. By harmonizing the wage orders’ three tests—which Martinez confirmedall hinge on theright of control—this Court can avoid upsetting decades of settled law, and the disruption that would result if the IWC’s tests were instead applied in a manner that eliminated independent contractor status for virtually all service providers in California. Accordingly, the U.S. Chamber and CalChamberrespectfully request that this Court accept andfile the attached amici curiae brief. December4, 2015 HORVITZ & LEVY LLP JOHN A. TAYLOR,JR. JEREMY B. ROSEN FELIX SHAFIR By: John A. Taylor, Ar. Attorneys for Amici Curiae CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA; CALIFORNIA CHAMBER OF COMMERCE AMICI CURIAE BRIEF INTRODUCTION The independent contractor relationshipis vital to the health of California’s economy and the job satisfaction of its workers. Nationwide, more than 10 million workers are independent contractors and account for almost one-half trillion dollars in annual personal income. Surveys show that the vast majority prefer to be independent contractors rather than employees, and that as a group, independent contractors have higher job satisfaction than employees. For businesses, especially small businesses that are the lifeblood of local communities, independentcontractors playa vital role. The availability of independent contractors allows businesses to respond to short-term economic changes by temporarily supplementing their existing workforce, avoiding the cost of extraneous permanent workers while financially protecting current employees. For small businessesin particular, use of independent contractors allows companies to hire workers with functional knowledge of critical gap areas—particularly regarding rapidly evolving technology—without requiringthe substantial investment that would be required to hire permanent employees with expertise that is used only on a sporadicbasis. Independent contractors’ vital role in California’s economy has long beenfostered by the standardsarticulated by this Court in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello). Borello articulated the commonlaw test for deciding whether workers are independent contractors under California law—a test that focuses on the right to control the manner and means by which the work is to be performed. This commonlaw test provides the guidance necessary for both workers and those hiring them to assess whois an independent contractor. It simultaneously sets meaningfullimits on independentcontractor status while at the sametimeleaving sufficient breathing spacefor the formation of the type of independent contractor relationships that have provedso critical to California’s economic growth and so satisfying to workers. Imposing severe limitations on the use of independent contractors, such as those called for by plaintiffs here, would lead to reduced workforce flexibility, slower economic growth, and higher unemployment in California. It would be particularly devastating to small businesses, which rely most heavily on the availability of independent contractors. As Dynamex has explainedinits briefs on the merits, the Court of Appeal’s application of such limitations— particularly, its application ofthe “suffer or permit” test drawn from the wageorders promulgated by the Industrial Welfare Commission (IWC)—threatens to eliminate or severely restrict the ability of businesses and even consumers to hire workers under an independent contractor relationship. In Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), this Court applied three alternative tests set by the IWC’s wage orders to determine which of multiple possible employers could be sued as joint employers by workers whom nobody disputed were employees. Thus, as Dynamex argues, Martinez merely applies to the determination of who is an employer of an undisputed employee, but leaves in place the Borello commonlaw test as the exclusive test for distinguishing between employees and independentcontractors. However, if this Court instead determines that Martinez governs the determination of both employer and employeestatus, then the Court should still avoid upsetting decades of settled independent contractorjurisprudencebyclarifying, in conformance with Martinez, that the IWC’s alternative tests are not meaningfully different in application from the modern-day common law test explained in Borello. As Martinez itself confirms, the three tests all hinge on the extent to which the hirer has the right to control the work. And as shownbelow,every subsequentstate court decision after Martinez, and nearly every subsequentfederal district court decision, has determined that application of the three tests— either holistically or individually—leads ineluctably to the same conclusion about whether a worker is an employee or an independent contractor regardless of which of the three tests is applied. LEGAL ARGUMENT I. INDEPENDENT CONTRACTORSARE ESSENTIAL TO A FUNCTIONING BUSINESS ENVIRONMENTAND TO CALIFORNIA’S ECONOMIC PROSPERITY. A. The history and development of the independent contractor relationship. Employmentlaws havetheir origin in the master and servant relationship, which has existed for centuries. (See 1 Blackstone’s Commentaries 410.) Traditionally, the master and servant relationship has been highly regulated, with laws setting the rate and method of payment required; the terms, responsibilities, and duties of employment; and limitations on when the relationship may be terminated. (Carlson, Why the Law Still Can't Tell an Employee When It Sees One and How It Ought to Stop Trying (2001) 22 Berkeley J. Emp. & Lab. L. 295, 302 (hereafter Carlson).) Concurrently, society also saw the developmentofthe predecessors of modern independent contractors—workersfor the public at large and not underthe control of a master. (Ud. at p. 303.) By the mid-nineteenth century, as the country entered the Industrial Revolution, determining employee status became important because an employercould face potential tort liability for the actions of an employee. (Carlson, supra, 22 Berkeley J. Emp. & Lab. L. at pp. 301, 304.) Employeeclassification further increased in importance as worker protection became a prevalent social and political concern, and worker protection legislation was enacted. (Id. at pp. 306-307.) To distinguish between servants and independent contractors, courts analyzed the master’s right to control the servant and the servant’s dependence on the master. (Id. at pp. 304-305;see, e.g., Bennett v. Truebody (1885) 66 Cal. 509, 512 [“The plumberwasleft to produce the desired result in his own way. If that did not constitute him an independent contractor, we do not know what would.”]; Bernauer v. Hartman Steel Co. (1889) 33 Ill.App. 491, 493 [property owner not liable for actions of worker who did not act under owner’s direction]; Hilliard v. Richardson (1855) 69 Mass. 349, 366 [employer not liable for negligent act “not done by one whom hehadthe right to command”].) Although determining a method for ascertaining whether workers were employeeshaslong beenanissuefor resolution by the legal system, courts have consistently recognized both the existence of independent contractorsand the fact that certain workers should not, and cannot, be considered employees. (Buscaglia, Crafting a Legislative Solution to the Economic Harm of Employee Misclassification (2009) 9 U.C. Davis Bus. L.J. 111, 112 [“the hiring of independent contractors is a legitimate and useful business practice with deep historical roots”].) B. The current prevalence of independent contractors. As of 2005, there were at least 10.3 million independent contractors in the United States, representing 7.4 percent of the 10 total workforce.2. (See U.S. Dept. of Labor, Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements (2005) p. 1 [as of Nov. 13, 2015] (hereafter BLS Report).) In the decade preceding 2005, the number of independent contractors grew by approximately 25 percent, suggesting similar or greater growth in the following decade through the present. (U.S. Govt. Accountability Office, Employment Arrangements: Improved Outreach Could Help Ensure Proper Worker Classification (July 2006) Appendix III: Size and Characteristics of the Contingent Workforce, Table 4, p. 47 [as of Nov. 13, 2015].) Surveys reveal that independent contractors are more likely to have a college education than those in traditional employment arrangements. (See BLS Report, supra, p. 4.) Manyolder, educated workers have chosen to become independent contractors as the job 2 This data is found in the Bureau of Labor Statistics’ 2005 Contingent Work Supplement (CWS) survey. The CWSsurvey measured the contingent workforce and tracked the demographics of alternative arrangement workers such as independent contractors. Previously, the Bureau of Labor Statistics performed the CWS survey in 1995, 1997, 1999, and 2001, but it has not received funding for the survey since 2005. (See U.S. Govt. Accountability Office, Contingent Workforce: Size, Characteristics, Earnings, and Benefits (Apr. 2015) p. 3 [as of Nov. 13, 2015].) While other surveys have attempted to capture similar data, the United States DepartmentofLabor recently noted that no other survey is as well-suited to track the contingent workforce as the CWS. (/d. at Enclosure V: Agency Comments,p. 69.) Therefore, these statistics are the most accurate and recent data tracking the presence of independentcontractors in the United States economy. 11 market has becomeless secure and more volatile. (See Kundaetal., Why Do Contractors Contract? The Experience of Highly Skilled Technical Professionals in a Contingent Labor Market (2002) 55 Indus. & Lab. Rel. Rev. 234, 235 (hereafter Kunda) (layoffs, market volatility, and expansion ofthe “contingent labor force” have shaken the longstanding belief that a traditional employmentrelationship is an ideal work situation].) Independent contractors have a particular prevalence in certain categories of positions, including: (1) cab drivers and couriers; (2) caregivers; (3) construction industry workers; (4) financial advisers; (5) forest product suppliers; (6) physicians; and (7) truck drivers. (Eisenach, The Role of Independent Contractors in the U.S. Economy(Dec. 2010) p. 21 [as of Nov. 13, 2015] (hereafter Eisenach).) More specifically, approximately 88 percent of taxi drivers, 22 percent of construction workers, 64 percent of practicing registered financial representatives, 23 percentofforest product suppliers, 12 percent of physicians, and 14 percent of truck transportation workers consider themselves independent contractors. (/d. at pp. 21-22, 24-28.) Use of independent contractors is particularly prevalent among small businesses. According to a 2008poll of small business owners, 61 percent reported hiring independent contractors within the preceding three years to perform construction, transportation, or computer work, with most hiring such workers on multiple occasions. (NFIB, National Small Business Poll, Independent Contractors (2008) vol. 8, issue 6, p. 7 [as of Nov. 13, 2015] (hereafter National Small BusinessPoll).) 12 Altogether, independentcontractors accountfor at least $473 billion in annual personal income, signifying a significant and permanent presence in the United States economy. (KEisenach, supra, p. 35.) C. Common misconceptions regarding the classification of workersas independent contractors. Some have suggested that employers intentionally misclassify employeesto avoid compliance with statutory employee protections. (See, e.g., Comment, The New Traditional Employment Relationship: An Examination of Proposed Legal and Structural Reforms for Contingent Workers from the Perspectives ofInvoluntary Impermanent Workers and Those Who Employ Them (2003) 43 Santa Clara L.Rev. 901, 911.) But most workers become independent contractors not due to coercive or manipulative demandsby employers, but by choice. (Polivka, Into contingent and alternative employment: by choice? (1996) 119 Monthly Lab. Rev.55, 70 (hereafter Polivka) [“the fear that large numbers of employers are abusing their employees by switching them from traditional to alternative arrangements appears unfounded’].) In fact, when surveyed about their work arrangements,over 82 percent ofindependentcontractors responded that they preferred their alternative work arrangement; only 9 percent answered that they would rather work in a traditional employmentrelationship. (BLS Report, supra, Table 11.) Job satisfaction is actually much 13 higher among independent contractors than among traditional employees. (See Pew Research Center, Take this Job and Love It (Sept. 17, 2009) [as of Nov. 24, 2015] [39 percentofself-employed workers (1.e., independent contractors) are “completely satisfied” with their jobs, compared to 28 percent in traditional arrangements]; Cohen and Eimicke, Independent Contracting Policy and Management Analysis (Aug. 2013) Columbia University’s School of International Affairs, at pp. 16-17 (hereafter Cohen and Eimicke) [self-employed individuals report greater job satisfaction because they generally “have more control over their economic destiny”].) | The growth and development of the independent contractor role has been largely augmented by the labor market’s continued expansion to include more women with children, students, the elderly, “moonlighters” with second jobs, and those on temporary layoffs. (Comment, The Employee/Independent Contractor Classification: Do Loan Officers Working with California Mortgage Brokers Qualify as Statutory Independent Contractors (1995) 32 San Diego L.Rev. 895, 902 (hereafter Employment/Independent Contractor Classification).) Independent contractingis attractive to these growing populations because the contractual relationship allows workers to move frequently from project to project, to work multiple projects at once (or noneat all), and to develop ownership capital in their own businessor work product. (Eisenach, supra, at p. 29; accord, Polivka, supra, 119 Monthly Lab. Rev. at p. 74 [for individuals “who are constrained by conditions outside of the labor market (for example, those with family or school obligations),”self- 14 employmentprovides “an opportunity to work that they might not otherwise have”]; Cohen and Eimicke, supra, at p. 16 [“the flexibility and independence”that the self-employed have “to choose [their] own hours, clients and manner in which the workis completed”is “[o]ne ofthe most frequently cited benefits of engaging in independent contracting”].) Further, the flexibility of independent contracting allows workers to create portfolios of various work experiences, making them more marketable in today’s volatile and competitive job market. (See Harnedet al., Creating a Workable Legal Standard for Defining an Independent Contractor (2010) 4 J. Bus. Entrepreneurship & L. 93, 98 (hereafter Harned).) Most independent contractors are not seeking a traditional employment arrangement precisely because they find their work situation to be more lucrative and more secure than traditional employment, and their independent contractor role gives them a greater sense of autonomy. (Kunda, supra, 55 Indus. & Lab. Rel. Rev. at p. 255 [contractors “generally prefer[] contracting and consciously accept[ ] its risks in hope of making more money while escaping the constraints of organizational life’); accord, Polivka, supra, 119 Monthly Lab. Rev. at p. 65 [“being an independent contractor affords them more job security than being someoneelse’s employee does, as well as giving them a degree of autonomythat they have come to enjoy’].) Because “independent contractors choose their ownjobsandclients, the quantity and quality of work is better correlated with the amount of money they make.” (Cohen and Eimicke, supra, at p. 16.) Thus, “highly motivated contractors 15 are more likely to earn more money than regular employees.” (Ibid.) Being an independentcontractoralso provides tax benefits to workers, as they can defer taxes until the following year rather than being subject to payroll deductions on a regularbasis, and can claim business tax deductions for many expenses. (Barton, Reconciling the Independent Contractor Versus Employee Dilemma: A Discussion of Current Developments as They Relate to Employee Benefit Plans (2001) 29 Cap. U. L.Rev. 1079, 1082 (hereafter Barton).) D. The economic benefits ofindependent contractors ina fluctuating employment market. Hiring an independent contractor allows the employer to reduce his capital requirements, shift some ofthe risk (and reward) to a separate business, and avoid the manycosts of the employment relationship, including therigidity of federal and state employment laws. Independentcontracting has flourished based on both supply factors (benefitting the worker) and demandfactors (benefitting the employer). (See Employee/Independent Contractor Classification, supra, 32 San Diego L.Rev.at p. 902.) The benefits of independent contractors to businesses include allowing companies to respond to short-term changes in demand, compensating for temporary or sudden shortages in a supply of labor, and giving employers the ability to evaluate job performance (and base compensation) on the 16 work product of the workers rather than only their time spent working. (Eisenach, supra, at p. 29.) The temporary and contractual nature of independent contractors allows an employer to temporarily supplement its workforce, implement new technology, and screen potential employees, while also financially protecting current employeesjobs by avoiding the cost of extraneous workers. (Employee/Independent Contractor Classification, supra, 32 San Diego L.Rev. at p. 902.) Employers frequently utilize independent contractors to supplement their labor supply when they do not want or cannot afford to hire additional employees. (Id. at p. 902 & fn. 28.) | At other times, independent contractors are necessary because an employee would not be able to perform the same work as effectively. For example, because of constantly evolving technology, most businesses are unable to keep their systemsup to date without the use of independent contractors who specialize in technology services, including installing, explaining, and implementing new technological products for businesses. (Barton, supra, 29 Cap. U. L.Rev.at p. 1087.) Becauseofthis specific need, up to 10 percent of workers in the technology industry are independent contractors. (Ibid.) Employers often form short-term business contracts with independent contractors, allowing for workforce flexibility and avoidanceof the significant fixed costs associated with hiring new employees(e.g., providing training and acquiring the capital to fund the position). (Eisenach, supra, p. 30.) For small businesses in particular, contracting allows companies to hire workers with 17 functional knowledge of gap areas without requiring a substantial investment by the business. (See National Small Business Poll, supra, p. 8; accord, Bauer, The Misclassification of Independent Contractors: The Fifty-Four Billion Dollar Problem (2015) 12 Rutgers J.L. & Pub. Pol’y 138, 143 [eliminating independent contractors “would require classifying all workers as employees, which would ultimately devastate small businesses whoare already struggling in this economy’].) Small businesses are especially vulnerable because their limited resources prohibit them from preparing for and protecting against every contingency, requiring them to rely heavily on independent contractors to patch these holes. (National Small Business Poll, supra, p. 7.) In short, all employers, regardless of size, continue to find that in the ever-changing workplace, using independent contractors is more cost-effective and produces a higher level of work satisfaction. (Harned, supra, 4J. Bus. Entrepreneurship & L.at pp. 98-99 [“As the marketplace changes, employers and individuals find lower costs and increased satisfaction in using the independent contracting model rather than traditional employment arrangements’].) E. The negative consequences of curtailing the availability of independent contractors. Curtailing the role of independent contractors would lead to reduced workforce flexibility and would likely result in slower economic growth and higher unemployment. (Eisenach, supra, at 18 pp. 39-40 [discussing relationship among lack of labor force flexibility, sluggish economic growth, and increased unemployment rates]; see also Cohen and Eimicke,supra, at p. 85 [“Ultimately, the tradeoff for government’s heightened enforcement of misclassification seems to come down to choosing between ease of tax collection on the oneside andjob creation and economic growth on the other”].) And because the use of independent contractorsis particularly field-specific (see ante, p. 12), the elimination or limitation of independent contractors in the workforce could wreak havoc in particular industries or sectors (Eisenach,at p. 38). For example, the majority of small businesses employ only five or fewer employees, relying heavily on independentcontractors. (See Eisenach,supra, p. 36.) Limiting the availability ofcontractors would lead “to reduced small businesscreation, a reduction in small business employment, and less entrepreneurialactivity.” (Id. at p. 37.) Companies throughout California, and small businesses in particular, would be left debilitated as they attempt to cope with replacing a vital portion of their workforce. (See National Small Business Poll, supra, p. 7; see also Note, Employees Versus Independent Contractors: Why States Should Not Enact Statutes That Target the Construction Industry (2018) 39 J. Legis. 295, 303 [explaining that diminished availability of independent contractors could “be devastating for businesses that make substantial use of independent contractors”].) In sum,“the independentcontractor relationship benefits the contractors themselves, the companies with which they contract, and the economyas a whole.” (Employee/Independent Contractor 19 Classification, supra, 32 San Diego L.Rev.at pp. 902-903.) Entering into an independent contractor relationship is a choice the law generally leaves open to the parties. Courts should be exceedingly cautious before disregardingthe parties’ decision to structure their relationship as an independent contractor arrangement, especially in light of the array of mutual benefits such a relationship can provide. II. IN DETERMINING EMPLOYMENT STATUS, THE WAGE ORDER TESTS CAN AND SHOULD BE HARMONIZED WITH BORELLO’S COMMON LAW TEST. A. The disruption of long-settled jurisprudence can be avoidedbyclarifying that the alternative IWC tests are not meaningfully different in application from Borello’s commonlawtest. Dynamex’s briefs on the merits cogently explain why an overbroad interpretation of the IWC tests—under which one becomes an employer merely by knowing workis being performed and failing to prevent such work, or merely by contracting with someone to perform services and thereby indirectly exercising control over their wages, hours, or working conditions—would effectively eliminate independent contractor status in California, chilling entrepreneurial activity and hurting California’s economy. (See, e.g., OBOM 19-28; RBOM 2-5, 8-9.). Under such an 20 S I G e d h e B i a s interpretation ofthe IWCtests, California would be deprived ofthe benefits discussed in the previous section, and would be put at an economic disadvantage in its competition with other jurisdictions for businesses, workers, and investment capital.2 As Dynamex correctly explains, this Court should hold that these IWCtests, howeverthey could be construed, do not govern whether a worker is an employee rather than an independentcontractor, and should be limited to the specific context addressed by Martinez—namely, determining whether multiple possible employerscanall be sued as joint employers by workers who no one disputes were employees. However, even if this Court disagrees with Dynamex and extends the IWC tests beyond the joint employment context to govern employee status too, there is still no justification for interpreting the IWC tests as if they imposed broad, materially different limitations than the limits set by the commonlawtest for 3 Plaintiffs suggest that this Court should decide the present appeal by focusing exclusively on “businesses (like Dynamex,in this case) which require a large workforce” (see ABOM 1, 61, fn. 5), and should ignore how its decision here will impact the many others who rely heavily on independent contractors. But the standards this Court applies will equally govern everyone who seeks to hire independent contractors, including the numerous consumers,sole proprietors, and small businesses who do so. Moreover,even if this Court’s decision here could somehow be confined solely to businesses with large workforces, there is no reason to think that imposing broad limitations on the ability of large businesses to engage independent contractors would be anyless detrimental to California’s economic prosperity than if those same limits applied equally to everyone. As explained earlier, curtaining the role of independent contractors would lead to reduced workforce flexibility and likely result in slower economic growth and high unemployment. (Ante, pp. 18-20.) 21 employee status articulated in Borello. This Court observed in Martinez that “the phrases the IWC presently uses to define the terms ‘employ’ and ‘employer’ in all 16 of its current industry and occupation wage orders .. . first appeared in orders dated 1916 and 1947, respectively, yet the courts of this state have never considered their meaning or scope.” (Martinez, supra, 49 Cal.4th at p. 50, emphasis added, fns. omitted.) Martinez was thusthefirst decision by this or any other California court to construe the IWC tests, and it did so narrowly. Asexplained below,the critical requirement under Borello’s common law test and the alternative IWC tests is the right of control. Accordingly, to the extent this Court concludes that the IWC tests apply in this case, it should—in conformance with Martinez—confirm that they are not meaningfully different in application from Borello’s commonlaw test. That holding would also avoid the numerousprocedural and substantive problems that would arise if the alternative IWC tests and the Borello common law test yielded different results in “mixed determinations.” (See RBOM16-19.) B. The application of the IWC’s three tests in Martinez confirms that the “right of control” is the determinative consideration underlyingall three tests, as it is under Borello’s commonlawtest. Martinez did not involve the essential question confronted by the lower courts here, i.e., what test should be used to determine 22 whether workers are employees rather than independent contractors. Rather, it was undisputed in Martinez that the plaintiff seasonal agricultural workers were the employees of a farming business. The question presented was instead whether certain third-party produce merchants and others were also plaintiffs’ employers, and therefore should be liable for failing to pay these employees minimum wages under Labor Codesection 1194. (Martinez, supra, 49 Cal.4th at pp. 42-49.) To “identify the persons who maybeliable as employers, in actions under section 1194,” Martinez examined the historical backdrop of the IWC’s wageorders and authority. (Martinez, supra, 49 Cal.4th at p. 51.) The Court concluded that the IWC defined employers to include those who: (1) “suffer or permit [workers] to work”; (2) “exercise[ ] control over the wages, hours, or working conditions” of workers; or (3) constitute employers under the “common law employmentrelationship” test. (/d. at pp. 52-60, 64- 65.) Characterizing these as “three alternative definitions,” the Court held that these tests governed “in actions under section 1194,” and determinedthat the plaintiffs had failed to show that the merchants were their employers undereither alternative to the commonlaw test. (/d. at pp. 64, 66, 68-77.) Plaintiffs concede that the third of these IWC tests—the “common law employmentrelationship” test (Martinez, supra, 49 Cal.4th at p. 64)—is the same commonlawtest articulated by this Court in Borello (ABOM 54 [plaintiffs explaining that IWC’s ““common law employmentrelationship’ ” test “is defined by the common law criteria included in the Borello factors test”]). But 23 plaintiffs argue that the two other IWC tests—which this Court held were not satisfied in Martinez—supposedly set materially different limitations than this commonlaw test. (See ABOM 51-54.) Plaintiffs are mistaken. The existence of three alternative tests is a function of history; the IWC first adopted the twoalternatives to the common law test (i.e., the [WC’s third test) in 1916 and 1947 to bring within its regulatory jurisdiction entities that controlled workers but who were not considered employers under the commonlaw at the time. (See Martinez, supra, 49 Cal.4th at pp. 57-59, 69.) But as plaintiffs assert, this Court’s 1989 decision in Borello “revisit[ed]” and “expan[ded]” the “traditional commonlawtest ofemployment” that had once governed independentcontractor statusin California, and applied an even “more expansivedefinition of ‘control’ ” than under the traditional common law test. (ABOM 20-22.) It is therefore unsurprising that today, following further development of the common law after the IWC’s adoption of alternative tests in 1916 and 1947, those tests are not meaningfully different in application from the modern-day common law test explained in Borello— assuming the alternative tests apply at all to a determination of independent contractor status. UnderBorello’s commonlawtest, “the foremost consideration” is “the extent of the hirer’s right to control the work.” (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 531-532 (Ayala).) In Martinez, this Court analyzed the two alternatives to the commonlawtest, the “suffer, or permit to work” test, and the “exercises control” test. (49 Cal.4th at pp. 69-77.) At bottom, this 24 Court’s application ofthese two alternative IWC tests was based on the very same consideration—the right of control—that would determine whether defendants were plaintiffs’ employees under Borello’s commonlawtest. The “suffer, orpermit to work”test. The IWC’s “suffer, or permit to work”test historically applied to a “proprietor who knows that persons are workingin his or her business without having been formally hired, or while being paid less than the minimum wage,” but who “clearly suffers or permits that work byfailing to prevent it, while having the powerto do so.” (Martinez, supra, 49 Cal.4th at p. 69.) As plaintiffs themselves observehere, this test originated in the context of child labor statutes, and was “crafted by the IWC... to address those situations where a purported employer’s intent to hire someone maybe subject to some sort of subterfuge or denial.” (ABOM 52-53.) Otherwise, an unscrupulous employer «we ¢ might claim a child “‘was not employed to do the work which caused the injury, but that he did it of his own choice andat his own risk.” (Martinez, at p. 58.)4 4 This Court relied exclusively on out-of-state cases construing the meaningofthe “suffer or permit to work” test. (Martinez, supra, 49 Cal.4th at pp. 57-59 & fn. 26, 69-70.) None of the authorities involved the issue of whether a worker was an employee or independent contractor, but rather the statutory liability of employers underlabor laws that prohibited suffering or permitting womenand children to perform certain types of work, where the employers generally argued the employees had not been hired to perform the particular work that caused injury. (See, e.g., Curtis & Gartside Co. v. Pigg (1913) 39 Okla. 31 [134 P. 1125, 1129] [“If the statute went no farther than to prohibit employment, then it could be easily evaded bythe claim that the child was not employed to do (continued...) 25 In present-day application, the gravamen of the “suffer, or permit to work”test is the extent of the hirer’s right to control the work (see Martinez, supra, 49 Cal.4th at pp. 69-70), just as that factor is “the foremost consideration” under the commonlaw test (Ayala, supra, 59 Cal.4th at pp. 531-532). Even plaintiffs acknowledge that this test “is essentially another expression of employer control” (ABOM 53), rather than a test that hinges on a factor other than theright of control. As this Court explained in Martinez, an employer “suffers or permits... work by failing to prevent it”—but only “while having the powerto do so.” (Martinez, at p. 69.) Thus, neither of the merchants who benefitted from plaintiffs’ work in Martinez “suffered or permitted plaintiffs to work because neither had the power to prevent plaintiffs from working.” (Id. at p. 70, emphasis added.) Rather,plaintiffs’ employer, not the merchants who purchased strawberries from plaintiffs’ employer and thereby benefited from plaintiffs’ labor, had “the exclusive (...continued) the work which caused the injury, but that he did it of his own choice andat his own risk”]; Purtell v. Philadelphia & Reading Coal & Iron Co. (1912) 256 Ill. 110, 117 [99 N.E. 899, 902] [“It is the child’s working thatis forbidden by the statute, and nothis hiring, and, while the statute does not require employers to police their premises in order to prevent chanceviolations of the act, they owe the duty of using reasonable care to see that boys under the forbidden age are not suffered or permitted to work there contrary to the statute”]; Casperson v. Michaels (1911) 142 Ky.314 [134S.W. 200, 201] [rejecting argument that plaintiffs certificate of employment defined the scope of her employment and employer should be liable because “she was injured at a part ofthe machinery where she was not employed to work, and at a time when she was not actually engaged in work”].) 26 powerto hire andfire [plaintiffs], to set their wages and hours, and to tell them when and whereto report to work.” (Ibid.) In focusing on the right of control, this Court rejected any interpretation of the “suffer, or permit to work” test that would create employer status based on mere knowledge that plaintiffs were working and that plaintiffs’ work benefited defendants. (Martinez, supra, 49 Cal.4th at p. 70.) There is accordingly no support for plaintiffs’ remarkable contention that this test is satisfied whenever one knowsofand “recei/ves/’ the “benefits of’ a worker’s labor. (ABOM 53.) To the contrary, this Court has held that “the concept of a benefit is neither a necessary nor a sufficient condition under the ‘suffer or permit’ standard.” (Martinez, at p. 70.) Rather, “the basis of liability is the defendant’s knowledgeof andfailure to prevent the work from occurring’—“while having the powerto do so.” (ld. at pp. 69-70.) Significantly, the “powerto do so”—i.e., to prevent work from occurring—does not include the economic powerto prevent plaintiffs from working, such as “by ceasing to buy strawberries.” (Martinez, supra, 49 Cal.4th at p. 70.) That is so even if not buying strawberries “might as a practical matter have forced [plaintiffs’ employer] to lay off workers or to divert their labor to other projects.” Ibid.) As this Court noted, “any substantial purchaser of commodities might force similar choices on a supplier by withdrawing its business” but “[s]uch a business relationship, standing alone,does not transform the purchaserinto the employer of the supplier’s workforce.” (Ibid.) Such an interpretation of the wage order would be “unreasonably broad” becauseit would create 27 “potentially endless chainsofliability” extending to “grocery stores that purchased strawberries from defendants” and even on to “consumers who in turn purchased strawberries from the grocery stores.” (I[bid.)5 This same logic applies as forcefully to the purchaser of services from an independentcontractor asit does to the purchaser of commodities such as the merchants in Martinez. The purchaser of services has the power to prevent the independent contractor (and its employees) from working by ceasing to purchase such services, but “[s]uch a business relationship, standing alone, does not transform the purchaser[of services] into the employer of the [independentcontractor’s] workforce.” (Martinez, supra, 49 Cal.4th at p. 70.) Here, as Dynamex cogently explains, the trial court misapplied the “suffer or permit to work” test to “make[ ] an employee out of anyone whopassively receives the benefits of labor despite having the power to stop it.”. (RBOM 8.) Under that erroneous application of the test, the plaintiffs would be Dynamex’s employees simply because Dynamexreceives the benefits of their services and “takes no action to prevent performance of the services.” (RBOM 2.) But as Martinez explained, neither the 5 Had the IWC intended the rule to apply so broadly, it would “have announced it in the plainest terms after vigorous debate.” (Martinez, supra, 49 Cal.4th at p. 70.) And even if that had been the IWC’s intent, it “would be difficult to justify as an appropriate exercise of the commission’s power.” ([bid.) Thus, “the IWC has not, in nearly a century of administering the minimum wage, seen fit to propose [such a] downstream-benefit theory ofliability.” (/d. at p. 71.) 28 receipt of benefits from plaintiffs nor the economic leverage to prevent them from workingby declining to purchasetheir services is sufficient to meet the “suffer or permit to work” test. Rather, at minimum, a contractual retention of authority to unilaterally terminateservices that is functionally equivalent to an employer's power to fire—i.e., the right to control the work—should be required. The “exercises control”test. The “exercises control over the wages, hours, or working conditions” of workers test in the IWC wage orders focuses on actual control of the work, and thusis narrower than Borello’s common law test, which focuses on “the hirer’s right to control the work.” (Ayala, supra, 59 Cal.4th at pp. 531-532.) In Ayala, this Court emphasized that “what matters under the commonlaw is not how much controla hirer exercises, but how much control the hirer retains the right to exercise.” (Id.at p. 533.) The trial court therefore erred in Ayala byrejecting class certification “based not on differences in [defendant’s] right to exercise control, but on variations in how thatright was exercised.” (id. at p. 528.) Because the right to exercise control necessarily precedes the actual exercise of control, the [WC’s “exercises control” test is subsumed within the commonlawtest. In Martinez, this Court rejected the argument that the IWC’s “exercises control” test could be met where a defendant’s financial dominationoverplaintiffs’ employer allowed it to exercise “indirect control over his employees’ wages and hours.” (Martinez, supra, 49 Cal.4th at p. 71, emphasis added.) Martinez held that because the defendants could not compelthe plaintiffs to work, lacked the right 29 to hire, fire, train, and supervise them, anddid not set their hours or break times, the defendants were not the plaintiffs’ employees under the “exercises control” test. (Id. at pp. 71-74.) Rather, plaintiffs’ employer “alone controlled plaintiffs’ wages, hours and working conditions.” (/d. at p. 71.) The fact-intensive analysis in Martinez into the defendants’ right ofcontrol over how theplaintiffs did their jobs illustrates that the IWC’s “exercises control” test is subsumed by—andcertainly no broader than—Borello’s common law test.6 Indeed, even plaintiffs appear to acknowledge that the “exercises control” test turns on the right of control, for they contend that this test is satisfied if the company whohires a worker had the “power and authority to negotiate and set the rate of pay” for the worker (ABOM 59)—in other words, had theright of control. C. In post-Martinez cases, the California and federal courts have focused on the right of control to conclude the sameresult is required regardless which test is applied. Because the alternative tests from Borello and Martinez hinge on a factual inquiry into the right of control, courts have considered 6 As part of its analysis, Martinez considered whether there would be any different result under the commonlaw test as applied in Borello, and concluded “the case does not advance plaintiffs’ argument.” (Martinez, supra, 49 Cal.4th at p. 73.) Thus, when this Court applied the “exercises control” test in Martinez, it saw no meaningful difference between that test and Borello’s common law test. 30 those tests holistically when evaluating the predominance requirement in putative class actions in lieu of mechanically assessing the propriety of class treatment alternative by alternative. Thus, even if this Court disagrees that the IWC tests should berestricted to the joint employment context, then holding that the alternative IWC tests are no different in application than the Borello commonlaw test would avoid the disruption of existing law that would result from the Court of Appeal’s approach here. For example, as explained in Bradley v. Networkers Internat., LLC (2012) 211 Cal.App.4th 1129 (Bradley)—on whichplaintiffs rely (see ABOM 16, 37-38)—“under the Borello or Martinez tests ..., the focus is not on the particular task performed by the employee, but the global nature of the relationship between the workerandthe hirer, and whetherthe hirer or the worker had the right to control the work.” (Bradley, at p. 1147, emphasis added.) In other words, underanytest, class treatment depends on whetheror not there is common proof of a right of control that is “uniform throughouttheclass.” (/d. at pp. 1146-1147.) As far as we can determine, no California appellate decision that has applied the IWC wageorder and Borello commonlawtests has ever found thatthose tests lead to different outcomes. In other words, even when separately applying the three tests, the courts have focused on the right of control under each test and have never determined that one of the alternate wage order tests required a different conclusion than the Borello commonlawtest: e Castaneda v. Ensign Group, Inc. (2014) 229 Cal.App.4th 1015, 1019-1024 (summary judgment reversed where evidence showed triable issue under the “‘three alternative 31 definitions’ ” in Martinez, and focusing on defendant’s right of and exercise of control over plaintiffs employer without differentiating amongthethree definitions in its analysis). Sotelo v. MediaNews Group, Inc. (2012) 207 Cal.App.4th 639, 662 (trial court’s application of only the commonlawtest to determine existence of employer-employee relationship was harmless error; “consideration of Martinez would not have affected the trial court’s conclusions”). Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, 1190 (“7-Eleven’s evidence ... satisfies its prima facie burden of showing it was not the employer of Aleksick or other class members underany definition of the employmentrelationship, whether based strictly on commonlaw or on the additional IWC wage order definitions of the type considered in Martinez” (emphasis added)). Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419, 1431-1435 (no employer-employeerelationship existed under any of the “control over wages, hours or working conditions,” “to suffer or permit work,” or “common law employment”tests). The same holds true for the vast majority of post-Martinez federal district court decisions applying the common law and alternate [WC wage order tests. Almost every such decision has either ignored any distinctions amongthetests in applying them holistically, or has found that all require the same result. For example: Vasquez v. Wells Fargo Bank, National Association (N.D.Cal. 2015) 77 F.Supp.3d 911, 923 (applying the three Martinez tests holistically to find that “Plaintiff has alleged no specific facts showing that Wells Fargo & Companyexercised control over Plaintiffs work activities” and that his “allegations are not sufficient to hold Wells Fargo & Companyliable as an employer under California law’). 32 Ochoa v. McDonald’s Corp. (N.D.Cal., Sept. 25, 2015, No. 14- cv-02098-JD) 2015 WL 5654853, at pp. *4-*7 [nonpub. opn.] (applying the three Martinez tests individually to determine summary judgment on claims alleging defendant was plaintiffs’ jont employer should be granted undereachtest). Betancourt v. Advantage Human Resourcing, Inc. (N.D.Cal., Sept. 3, 2014, No. 14-cv-01788-JST) 2014 WL 4365074,at pp. *4-*6 [nonpub.opn.] (allegations of employmentrelationship found adequate under each of the Martinez tests applied separately). Hammitt v. Lumber Liquidators, Inc. (S.D.Cal. 2014) 19 F.Supp.3d 989, 1002-1003 (applying the three Martinez tests holistically to determine that “disputed facts preclude summary judgment on the question of whether Lumber Liquidators was an ‘employer’ of Plaintiff’). Taylor v. Waddell & Reed Inc. (S.D.Cal., Feb. 1, 2013, No. 09- cv-02909 AJB (WVG)) 2013 WL 435907,at pp. *3-*6 [nonpub. opn.] (applying the three Martinez tests individually and finding plaintiff an independent contractor underall three). Braboy v. Staples, Inc. (N.D.Cal., Feb. 24, 2011, No. C 09- 4534 PJH) 2011 WL 743139, at p. *1 [nonpub.opn.] (granting summary judgmentthat Staples wasnot plaintiffs employer by applying “the controlling legal standard set forth in Martinez”holistically to determine Staples did not “exercise control over [plaintiff's] wages, hours or working conditions’). Martinez v. Antique & Salvage Liquidators, Inc. (N.D.Cal., Feb. 8, 2011, No. C09-00997 HRL) 2011 WL 500029,at p. *5 [nonpub. opn.] (applying Martinez definitions holistically to find defendant “not liable as an ‘employer’ under California law” because he “wasnot involvedwith[plaintiffs’ employer’s} day-to-day operations and never had any involvement in the hiring, firing, hours, breaks, or compensation of Plaintiffs”). Rodriguez v. SGLC, Inc. (E.D.Cal., July 23, 2010, No. 2:08-cv- 01971-MCE-KJN) 2010 WL 2943128, at p. *5 [nonpub. opn.] (applying Martinez’s “three alternate definitions of ‘to employ’ ” holistically to determineplaintiffs alleged sufficient 33 facts to “establish a joint employer relationship” where “Plaintiffs claim that Defendants controlled Plaintiffs’ work schedules, number of hours worked, and ratesof pay”).? In sum, amici fully support Dynamex’s position that the IWC tests should not be extended beyondthe joint employment context to govern employee status as well. But should this Court disagree with that position, then rather than requiring courts to assess independent contractor status through a mechanical application of the three alternative tests, this Court should follow the approach taken by Bradley, where the Court of Appeal recognized that, “under the Borello or Martinez tests,” the “focus” is on “the global nature of the relationship between the worker andthe hirer, and whetherthe hirer or the worker had theright to control the work.” (Bradley, supra, 211 Cal.App.4th at p. 1147.) In other words, in conformance with its application of each of the IWC’s three wage order tests in Martinez, this Court should harmonize the Borello common law test and the alternative IWCtests by holding that the samefactors associated with the right to control are determinative underall three tests. 7 But see Arredondo v. Delano Farms Co. (E.D.Cal. 2013) 922 F.Supp.2d 1071, 1088 (findingplaintiffs were employees only under the “control” test, where plaintiffs did not argue the common-law test and no determination underthe “suffer or permit to work” test was made dueto “the limited scopeofthis trial”); Lazaro v. Lomarey Inc. (N.D.Cal., Feb. 21, 2012, No. C-09-02013 RMW) 2012 WL 566340, at p. *7 [nonpub. opn.] (defendant not plaintiffs’ employer under Martinez “definitions (a) and (c),” but “were employers of plaintiffs under the ‘to suffer’ or ‘permit them to work’ standard”). 34 CONCLUSION For the reasons explained above, the continuing existence of the hirer-independentcontractorrelationshipis vital to the health of California’s economy andto the interests of its workers. This Court should hold either that the commonlawtest as explicated in Borello remains the exclusive test for determining independent contractor status, or should harmonize the three tests set forth in Martinez by holding that the Borello factors associated with the right of control are determinative underall three tests. December 4, 2015 HORVITZ & LEVY LLP JOHN A. TAYLOR,JR. JEREMY B. ROSEN FELIX SHAFIR By: feyGk John Afaypr. dr. Attorneys for Amici Curiae CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA; CALIFORNIA CHAMBER OF COMMERCE 35 CERTIFICATE OF WORD COUNT (Cal. Rules of Court, rule 8.204(c)(1).) The text ofthis brief consists of 8,276 words as countedby the Microsoft Word version 2010 word processing program used to generatethebrief. Dated: December 4, 2015 John pf Taylor. mY / 36 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES At the time of service, I was over 18 years of age and not a party to this action. I am employed in the County of Los Angeles, State of California. My business address is 15760 Ventura Boulevard, 18th Floor, Encino, California 91436-3000. On December4, 2015, I served true copies of the following document(s) described as APPLICATION FOR LEAVE TO FILE AMICI CURIAE BRIEF; AMICI CURIAE BRIEF OF CHAMBER OF COMMERCEOFTHE UNITED STATES OF AMERICA AND CALIFORNIA CHAMBER OF COMMERCE IN SUPPORTOFPETITIONER DYNAMEXOPERATIONS WEST,INC. onthe interested parties in this action as follows: SEE ATTACHED SERVICE LIST BY MAIL: I enclosed the document(s) in a sealed envelope or package addressed to the personsat the addresseslisted in the Service List and placed the envelope for collection and mailing, following our ordinary business practices. I am readily familiar with Horvitz & Levy LLP’s practice for collecting and processing correspondencefor mailing. On the samedaythat the correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I declare under penalty ofperjury underthe lawsofthe State of California that the foregoingis true and correct. Executed on December 4, 2015, at Encino, California. Wythe Crate Mill eCowley JJ SERVICE LIST Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County Case No. S222732 Robert G. Hulteng Damon M.Ott Littler Mendelson PC 650 California Street, 20th Floor San Francisco, CA 94108 Ellen M. Bronchetti Paul S. Cowie Sheppard Mullin Richter & Hampton LLP Four Embarcadero Center, 17th Floor San Francisco, CA 94111 A. Mark Pope Pope, Berger, Williams & Reynold LLP 401 West A Street, Suite 2000 San Diego, CA 92101 Kevin Ruf Glancy, Prongay & Murray 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Jon R. Williams Boudreau Williams LLP 666 State Street San Diego, CA 92101 Hon. Michael L. Stern Los Angeles Superior Court 111 N. Hill Street, Dept. 62 Los Angeles, CA 90012 Attorneys for Petitioner DYNAMEX OPERATIONS WEST, INC. Attorneys for Petitioner DYNAMEX OPERATIONSWEST, INC. Attorneys for Real Parties in Interest CHARLES LEE and PEDRO CHEVEZ Attorneys for Real Parties in Interest CHARLES LEE and PEDRO CHEVEZ Attorneys for Real Parties in Interest CHARLES LEE and PEDRO CHEVEZ Case No. BC332016 California Court of Appeal Second Appellate District, Division Seven 300 S. Spring Street, 2nd Floor North Tower Los Angeles, CA 90013 Attorney General Appellate Coordinator Office of the Attorney General Consumer Law Section 300 S. Spring Street Los Angeles, CA 90013-1230 District Attorney’s Office County of Los Angeles 320 West Temple Street, #540 Los Angeles, CA 90012 Case No. B249546 Service Required by Bus. & Prof. Code, § 17209 and Cal. Rulesof Court, rule 8.212(c) Service Required by Bus. & Prof. Code, § 17209 and Cal. Rulesof Court, rule 8.212(c)