"Recent cases could inform upcoming rulings on contract work"
Daily Journal, July 26, 2018

By Andy Serbe

A test laid down by the California Supreme Court to identify contract workers will be a likely focus in upcoming lawsuits.

Photo company Shutterstock Inc.'s classification of workers as contractors fails a test laid down by the California Supreme Court, according to a proposed class action seeking lost wages and penalties.

In late April, the Supreme Court's decision in Dynamex Operations West Inc. v. Superior Court, 2018 DJDAR 3856 (April 30, 2018), affirmed the employee-presumptive "ABC test" as the state standard for classification.

Employer-side attorneys have criticized the ABC test as nearly impossible to satisfy and speculated it could damage the "gig economy" by rendering business models predicated on contractor use inoperative.

The three prongs of the test are: the worker must be free from control of the hirer, the worker must perform work outside the core purpose of the company, and the worker must have an established business independent from the hirer in a separate industry.

According to the lawsuit against Shutterstock, filed Friday in Sonoma County Superior Court, the company's "image reviewer" position fails the second condition. Image reviewers are responsible for vetting photos according to internal guidelines before they can be used, the lawsuit says. Call v. Shutterstock, Inc., SCV262841 (Sonoma Super. Ct., filed July 20, 2018).

"They're performing one of the core functions that Shutterstock is delivering, which is content they have put through a regimented screening process. These are folks that comb through thousands of images and photos a day and are enabling Shutterstock to deliver content to its customers," said Bryan Schwartz of Bryan Schwartz Law, who filed the suit.

Shutterstock declined to comment on pending litigation.

Additionally, Schwartz's suit and others like it could be unofficially informed by a ruling issued in a similar case in Orange County Superior Court, in which a judge reasoned the Dynamex decision, and the ABC test, should be applied retroactively. Johnson v. VCG-IS, LLC, et al., 30-2015-00802813-CU-CR-CXC (Orange Super. Ct., filed Aug. 5, 2015).

Charles O. Thompson of Polsinelli LLP, an employers' attorney who is not involved in either lawsuit, noted, "Although the ABC test is a new standard and commentators are assessing it as a stringent test, the court will have to evaluate this case on its merits. The Johnson ruling is not controlling here."

Orange County Judge William D. Claster wrote in his July 18 Johnson ruling, "Even though Dynamex established a new standard for evaluating independent contractor/employee issues [...], it did not state that its decision applied only prospectively." 

Claster further reasoned the California Supreme Court's denial of requests to clarify the Dynamex ruling as prospective was indicative of the decision's retroactivity.

Schwartz said while Claster's reasoning is unsurprising, the ruling articulates a refutation of a defensive argument he expects.

"Of course Dynamex is going to be retroactive, because it's interpreting existing law, and there's no new statute that it relates to. So, the default of any opinion is that it would apply retroactively," Schwartz reasoned. "Obviously in our case, it's one less excuse they can try."

"I do think that that ruling is important and it confirms what we anticipated in the workers' rights community," he continued.

Attorney Aashish Y. Desai, who is not involved in the suit but represents truckers in similar lawsuits over alleged misclassification, agreed and said Claster's ruling could serve as a guidepost to other judges, though it is not legally binding.

"Another important argument addressed by Judge Claster is that Dynamex only applies to wage orders. He said it also applies to statutory violations of the labor code," Desai said.

Claster wrote that while Dynamex concerned wage order violations, and the decision specifically discusses the test in that context, it should be applied to code violations, at least where the claims are similar. 

"Indeed, the suggestion that multiple tests should apply to state law wage and hour claims runs counter to the purpose of Dynamex -- providing greater clarity and consistency," the judge added.

Schwartz and Desai agreed Dynamex created a clear standard and sent up a signal that should have put employers on notice.

"Other companies should be looking at what's happening with Shutterstock here and thinking they might be next," Schwartz said, adding that colleagues in the plaintiffs' bar are looking for cases to bring under the ABC test.

"It's about as bright a line as you can have, and it's so bright that it's going to destroy any employer still trying to use the independent contractor classification in California," Desai opined. "The message is strong, and it's been delivered very clearly: Dynamex has changed the landscape, and workers in California are going to be employees."