United States: California Court Of Appeal Establishes Classification Of Domestic Caregivers As Employees Or Independent Contractors

California (February 25, 2019) – California's approach to classifying independent contractors from employees has undergone significant developments over the past year. As we've explained in previous client alerts, the California Supreme Court held in Dynamex Operations v. Superior Court that the "ABC test" is the proper method of determining whether a worker should be classified as an independent contractor or an employee, replacing the more lenient Borello test.

Next, the California Court of Appeal clarified the application of the ABC test in Garcia v. Border Transportation Group, LLP, where it held that the test only replaces the Borello method when applied to wage and hour claims under the Industrial Welfare Commission Wage Order.

The Court's most recent opinion on this line of issues is Duffey v. Tender Heart Home Care Agency, LLC. In Duffey, the California Court of Appeal addressed classification of workers under the Domestic Worker Bill of Rights (DWBR), which sets forth overtime pay obligations to for domestic caregivers. The Duffey Court held that the DWBR provides its own unique test for classifying domestic workers as employees or independent contractors, distinct from the ABC or Borello tests.

Duffey v. Tender Heart Home Care Agency, LLC

Nichelle Duffey worked as an in-home caregiver for Tender Heart Home Care Agency, LLC. She generally provided typical in-home services to clients, including bathing assistance, transportation, simple medical assistance, and overall companionship. Prospective clients would contact Tender Heart for services, and Tender Heart would select an appropriate caregiver and connect him or her with the client. Tender Heart would then bill the client for the caregiver's services, take its share of the fees, and send the remainder of the money to the caregiver. Caregivers were free to provide services through other agencies at the same time, and they also had the option to reject any of Tender Heart's potential clients.

After Duffey's contract with Tender Heart was terminated, she sued Tender Heart for failure to pay overtime wages under the DWBR, among other claims. The trial court granted Tender Heart's motion for summary judgment as to the overtime claim, applying Borello to determine that Duffey was an independent contractor and thus not entitled to overtime. Duffey appealed the trial court's decision.

The Court of Appeal held that the DWBR provides its own separate standard for determining whether a worker should be classified as an employee or independent contractor for purposes of the DWBR's provisions. It thus determined that neither the ABC test nor the Borello test are the de facto rule when the worker in question is a domestic caregiver, and went on to interpret exactly what test the DWBR provides. Instead, the Bill provides "two alternative definitions" of employment: first, "when the hiring entity exercises control over the wages, hours, or working conditions of a domestic worker;" and second, "when a common law employment relationship has been formed." These are both to be construed broadly. The Court reversed and remanded the case for the trial court's factual determination under the newly defined DWBR test.

1. Control Over Wages, Hours or Working Conditions

The Duffey Court established that control over these characteristics is shown by evidence that the company had the final say, or at least strong influence, in setting wages, hours, or working conditions. The Court specified that a worker need only prove that the company had control over one of these three, and it is not necessary to show control over all of them.

Applied to the facts in Duffey, the Court found that Duffey raised a material dispute as to whether Tender Heart exercised control over her wages, given its power to negotiate and set her rate of pay with each client. The Court did not find a factual dispute as to hours or working conditions in this case.

2. Formation of Common Law Employment Relationship

Here, the Duffey Court went back to the more lenient Borello test, where the general inquiry is whether the company controls the worker's activities so pervasively that the worker effectively becomes an employee, regardless of the worker's title with the company.

The Court found triable issue of material facts when applying the Borello factors here. Most notably, it found that Duffey was not engaged in a separate line of business from Tender Heart, and that Duffey's caregiving did not necessarily require specialized skills or tools, factors which weighed towards the formation of a common law employment relationship under Borello.

Future Implications

The Duffey case is the latest installment in the California judiciary's trend of refining and narrowing the circumstances in which a company can definitively determine that its worker is an independent contractor. Although Duffey is limited to domestic caregivers under the DWBA, it continues the employee-friendly trend, and plaintiffs will likely argue for application of its analysis to other areas of the law as well.

As a recent Court of Appeal decision, Duffey could also be subject to review by the California Supreme Court. Companies should continue to review their independent contractor classification policies, while keeping an eye on the courts' expansion of the "employee" classification.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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