Synopsis: Will “Dynamex” Come to Illinois and Other States Soon? I consider this required reading for HR, Risk and WC claims handlers.
Editor’s comment: I truly feel my readers need to know of this “Left Coast” mess because we have no way to stop the concept in Illinois if the super-majorities in our State Senate and House want to bring it here. Our wildly liberal Governor is almost certain to sign off on it. I doubt our surrounding States will have any interest in it but you never know.
Please also note the Dynamex concept has been codified in legislation that has passed both California legislative houses and is simply awaiting the Governor’s signature (or inaction which will make it law). If/when that happens, it is certain to apply to companies from any State when they operate in and possibly around California. The legislation has tried to address federal issues that may block implementation.
For workers’ comp purposes, what might now be “independent contractors” in Illinois would magically turn into employees if/when they suffer work-related injuries or exposures leading to occ diseases. While this might grow workers’ comp claims and exposure, it would also make any State that adopts this new concept wildly less competitive than States that do not adhere to the Dynamex concept. Please note lots of other employee benefits, like unemployment comp, group medical care, discrimination/harassment protections and the like may be extended to the newly designated “employees.”
Last year, the California Supreme Court issued a landmark decision in the matter of Dynamex Operations West, Inc. v. Superior Court of Los Angeles. In a voluminous, 82-page decision, the California Supreme Court reinterpreted and ultimately rejected an earlier test for determining whether workers should be classified as either employees or independent contractors for the purposes of the wage orders adopted by California’s Industrial Welfare Commission (“IWC”) in favor of a worker-friendly standard that may upend the existing independent contractor or what is called the “gig” labor market.
In particular, the Court embraced a standard presuming all workers are to be treated as employees instead of as independent contractors, and placed the burden on any entity classifying an individual as an independent contractor of establishing such classification is proper under their newly adopted “ABC test.”
Dynamex is a nationwide same-day courier and delivery service that offers on-demand, same-day pickup and delivery services to businesses and the public. Prior to 2004, Dynamex classified its California drivers as employees. Starting in 2004, however, Dynamex converted all of its drivers to independent contractors. If a worker didn’t want that status, they could look for other work.
In January 2005, Plaintiff Charles Lee entered into a written independent contractor agreement with Dynamex to provide delivery services for the company. Just three months after leaving his work at Dynamex, Lee filed this lawsuit on his own behalf and on behalf of similarly situated Dynamex drivers, alleging Dynamex’s alleged misclassification of its drivers as independent contractors led to Dynamex’s violation of the provisions of IWC wage order No. 9, the applicable state wage order governing the transportation industry, as well as various sections of the Labor Code, and, as a result, that Dynamex had engaged in unfair and unlawful business practices under Business and Professions Code section 17200.
In a ruling named Borello, the CA Supreme Court held that the “right to control” the means and manner in which work is performed by a worker is the most important of several factors to be considered when evaluating a classification analysis, including secondary factors such as ownership of equipment, opportunity for profit and loss, and the belief of the parties. This test was more flexible because it balances the different factors to arrive at a classification based on individual circumstances of each case. Prior to Dynamex, many cases (including the Court’s own recent decisions) referred to the multi-factor Borello test as the traditional “common law” classification analysis.
The CA Supreme Court’s Decision
As a threshold matter, the Court framed its decision by broadly characterizing the misclassification of independent contractors as “harmful and unfair” to workers, honest competitors, and the public as a whole. The Court provided a long, detailed, and nuanced analysis of the relevant case lineage. In doing so, the Court read each of these cases and their respective holdings in a very worker-friendly fashion.
In particular, the Court interpreted the Borello test as going beyond the traditional common law classification analysis, and that it instead “calls for the application of a statutory purpose standard … to determine which classification … best effectuates the underlying legislative intent and objective of the statutory scheme at issue.” That is, the Court clarified it reads Borello to stand for the proposition the remedial purpose of any employment legislation (such as the workers’ compensation laws at issue in Borello) must always be taken into account in the classification analysis.
The Dynamex “ABC Test”
Under the ABC test, a worker will be deemed to have been “suffered or permitted to work,” and thus, an employee for wage order purposes, unless the putative employer proves:
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;
the worker performs work outside the usual course of the hiring entity’s business; and
the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Note that each of these requirements need to be met in order for the presumption a worker is an employee to be rebutted, and for a court to recognize that a worker has been properly classified as an independent contractor.
What This Means For U.S. Businesses If It Expands to Other States
The question of whether an individual worker should be classified as an employee or independent contractor has considerable significance for workers, businesses, and the public generally. If a worker is classified as an employee, the employer bears the responsibility of paying Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and of course, complying with the endless labyrinth of state and federal statutes governing the wages, hours, and working conditions of employees.
Indeed, many businesses, particularly those operating in the “gig economy,” are fundamentally premised on the use of independent contractors. In light of this case, any businesses operating in California that treat workers as independent contractors should confer with their legal counsel to review the relationship under the “ABC test” and determine whether any or all such workers should be reclassified.
For example, prong B of the ABC test is particularly troublesome for any businesses that use independent contractors to deliver or provide their core product or service. In applying the ABC test to Dynamex, the Court noted that a class of delivery drivers could be certified under prong B because the question of whether the delivery drivers were performing outside the usual course of Dynamex’s business could clearly be resolved on a class-wide basis. Indeed, delivery services—which are provided by the delivery drivers—are the very core of Dynamex’s business.
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Synopsis: An Interesting “Arising Out Of” WC Ruling From France.
Editor’s comment: It is all over the Web and lots of my readers have sent it for my thoughts, so you may as well know them.
News reports indicate while on a business trip, a technician for a French railway company died of a cardiac arrest after intimate relations with a woman he met. The word “after” in the news reports appears to indicate he wasn’t active when his heart failed—I guess we will never know.
Appeal court judges in Paris ruled recently because Xavier X -- his name in court records -- was away from his normal work and home and on assignment for his employer, the death counts as a workplace “accident” and his company is liable and his family is entitled to workers’ compensation. You may note his widow has to make the claim on her behalf and also for any children/dependents, despite the sad fact hubby wasn’t being true to her.
According to French court records, the company's WC defense lawyers argued the employee -- who was married but not to the lady he was with -- was not performing professional duties or following any business practice at the time of his death, saying he was instead committing an "[intimate act] that he had had with a [somewhat] complete stranger" in her hotel room.
However, the judges interpreted the “traveling employee” concept and said French workers on business trips are "entitled to their employer's protection for the duration of their mission ... whether or not the accident takes place as part of a professional activity or as an act of normal life."
The company was challenging a 2016 ruling by the state health insurance provider that categorized the death as an industrial accident. The Times of London reports in its ruling, the provider said "an … encounter is an act of normal life like taking a shower or eating a meal."
As a result of the latest ruling, the family -- partners and children -- will get a monthly benefit of up to 80% of his salary until what would have been his retirement age. After that, they will get a share of his pension.
In my humble view, actions of daily life, like combing your hair, going to the potty and intimacies such as this should not be “work-related” whether you are at your normal work or away from work. I handled a claim where a worker died on the commode—the Arbitrator would not provide workers’ comp benefits simply because this guy was on the road. I agreed with that Arbitrator then and I would agree with him/her now.
How do you feel about it? Feel free to send a respectful reply with your thoughts.
Illinois Chamber of Commerce Conference 10/8/19
Agenda will include:
7:30 a.m.–8:30 a.m. Registration and Breakfast Networking – Expo is open
8:30 a.m.–8:55 a.m. Opening Remarks
Jay Shattuck, Executive Director Employment Law Council, Illinois Chamber of Commerce
Michael Brennan, Chairman, Illinois Workers’ Compensation Commission
8:55 a.m.–9:45 a.m. General Session – Medical and Recreational Marijuana in Illinois and the effect on WC Claims Handling
Shuaib Ahmed, ASA Law Group Shuaib Ahmed will dissect the Medical Cannabis Act, discuss both medical and recreational marijuana in Illinois and the challenges facing Employers navigating Workers’ Compensation claims.
9:45 a.m.–10:10 a.m. Morning Break & Visit Exhibitors
10:10 a.m. – 11:05 a.m. First Series of Workshops
Workshop #1: Shawn Biery, John Campbell and Bradley Smith, Keefe Campbell Biery & Associates
Impact and Implications of SB 1596 (Civil Action may be brought against Employer) Join John Campbell and Shawn R. Biery from Keefe, Campbell, Biery & Associates for a break out session discussing the impact and implications of SB 1596, as well as brainstorming strategies on how employers can best prepare to protect themselves. These veteran workers compensation defense attorneys will also cover relevant recent case law updates to provide guidance which will be helpful for anyone who deals directly or peripherally with workers’ compensation claims. Questions will be entertained throughout to drive the discussion toward specific avenues of interest from the audience.
Workshop #2: Michael Teti, Digistream Investigations in the Age of Geosocial Data
The current growth of geosocial data is changing the face of risk management and investigations. Learn what geosocial data is, and exactly how this type of information is used to uncover fraud and investigate insurance claims of all kinds. Understand how to gain eye-opening insight into accidents, site-security, workplace harassment, and high exposure incidents by locating social media photographs, videos and posts at specific locations and times anywhere in the world. The session examines successful real life cases, fascinating trends in social media, privacy and legal issues, as well as preserving, authenticating and presenting cyber evidence in court. Attendees will work with an understanding of best practices and ethical requirements for a successful geosocial investigation and how to add this new information into their already wide range of skills.
Workshop #3: Surbhi Saraswat Goyal and Charles Maring, Brady Connolly Masuda, P.C. Defending Work Injuries . . . Before They Happen!
In this workshop learn practical, low-cost strategies that employers can implement in-house to prepare for a work injury before it happens! Attorneys Surbhi Saraswat Goyal and Charles M. Maring, II reveal battle-tested strategies and helpful trial evidence that is beneficial in the defense of workers’ compensation claims. These strategies can help Employers, Human Resource and Safety Personnel meditate costs and protect the company’s interests. Know your rights as an employer and turn standard practices into assets!
11:10 a.m. – 12:05 p.m. Second Series of Workshops
Workshop #1: Brian Clay, MD, Illinois Bone & Joint Institute Standardizing a Return to Work Protocol for Back Injuries in the Workplace
Attendees will understand the markers of when a patient can return to work duty with low back pain, what to avoid, standard practices, and improvements in the process. By following a researched set protocol, return to work for low back injuries will be more efficient and economical. Attendees will also understand the insurance implications, cost saving, and improved return to work times for these patients by following a researched protocol.
Workshop #2: Steve Murdock and Jynnifer Cotharn, Inman & Fitzgibbons, Ltd. Best Tools for Defense; Strategic Use of IMEs, Record Reviews, Utilization Reviews, Impairment Ratings
Effective claims management often requires different strategies at different points in the litigation process. Understanding the tools that are available to help protect the insured’s interests is a critical part of claim handling. Should I get an IME? What are the benefits of obtaining a Utilization Review? How much weight is given to an impairment rating? In this seminar, we will address these questions along with four defense tools, their benefits and risks, and how each tool impacts cost and advancement of claims to closure.
Workshop #3: Jeffrey Risch, Smith Amundsen, LLC OSHA Obligations and Workers Compensation in Illinois
In this presentation, led by Labor & Employment Attorney Jeffrey Risch, attendees will receive the latest in employer OSHA obligations related to work related injuries and claims. From reporting and recording requirements, to drug testing rights and disciplinary options when an employee is involved with a work related injury due to an unsafe act or rule violation, attendees will hear the very latest on what employers must do, can do, shouldn’t do and can’t do when it comes to OSHA and work related injuries.
12:05 p.m. – 12:30 p.m. Visit Exhibitors & Networking Break
12:30 p.m.–1:30 p.m. Luncheon with Keynote Speaker
The Intersection of Rx Opioids & Medical Marijuana Mark Pew, Senior Vice President, Product Development & Marketing, Preferred Medical Medical cannabis as a substitute for prescription opioids continues to grow in the public (and private) discourse on pain management. Is that a surprise? For citizens of Illinois it should not be since last year’s introduction of the “Opioid Alternative Pilot Program”. But Illinois is not alone in the connection as per the January 24, 2019 blog post “Marijuana & Opioids” that listed three other states with an explicit connection (Colorado will officially make it five total in August 2019) and another six states with an implicit connection. While this connection is mostly political and anecdotal (based on personal stories and experiences) there is a growing amount of science (clinical studies) to substantiate the premise. This session will discuss the evolution in thought, present the anecdote and evidence behind the connection, highlight the implications for workplaces, and talk about how a drug-for-drug substitution might not be the full answer.
1:30 p.m.–2:30 p.m. Roundtable Discussion with Q&A
Moderator: Jay Shattuck, Exec Dir Employment Law Council, Illinois Chamber of Commerce • Panelist: Amy Bilton, Nyhan Bambrick Kinzie & Lowry
Panelist: Dr. David Fletcher, Safeworks Illinois
Panelist: Mike Brennan – Chairman, Illinois Workers Comp Commission
Implementation of SB904 and discussion of billing and payment problems in the WC system
2:30 p.m.– 3:00 p.m. Drawings for Prizes & Closing Remarks
3:00 pm Adjourn
Questions on this event or other IL Chamber Business Services events?
Contact the Business Services Coordinator,
P: 217-522-5512 Ext. 227