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California Labor Law News

October 24th, 2007 Posted by Amelia

There are several new developments in California labor law that HR professionals will want to keep an eye on including a new Labor Commissioner and an important judicial decision.

Governor Arnold Schwarzenegger recently appointed Angel Bradstreet to the position of Labor Commissioner. Bradstreet is 52 and a resident of Sausalito. Since 1981, she has served with the firm of Carroll, Burdick & McDonough, where she is currently managing partner and Vice Chair of Employment. She was instrumental in creating the No Glass Ceiling Initiative to promote the careers of women in the law. The organization supports women’s efforts to gain partner or management status in law firms, legal departments in the public sector and corporate legal departments. Bradstreet is also past president of the California Women Lawyers, Queens Bench and the San Francisco Bar Association.

Bradstreet will head the Department of Industrial Relations, a division within the state’s Labor and Workforce Development Agency.

On another front, Bradstreet’s new agency, the Department of Industrial Relations, just won a significant victory in the California Court of Appeals, Sixth District.

This case has wide-ranging implications for employers nationwide. It sends a clear message that the courts will not tolerate employers who try to avoid paying benefits, workers’ comp insurance, overtime or unemployment by inaccurately classifying all employees as independent contractor.

In this particular case, JKH Enterprises vs. the Department of Industrial Relations, the DIR inspected a small courier firm. An attorney had advised the small courier company to classify all its workers as independent contractors. In 2006, a DIR inspector determined that since JKH determined when and in what manner the workers completed their duties, they were employees and not independent contractors.

The DIR advised JKH that the workers were employees. As such, they were entitled to overtime pay, the minimum wage, workers’ compensation, paid meal breaks, and unemployment insurance.

A second inspection showed that JKH still treated the employees as independent contractors. At that time, the issued a stop order, requiring JKH Enterprises to instate the workers as employees and fining the company $1,000 per worker.

Under California law, worker who perform tasks that are integral to the business cannot be independent contractors – they must be treated as employees. The DIR inspector found that drivers were integral to JKH’s business of package delivery.

JKH appealed the ruling in Superior Court. The District Court of Appeal upheld the ruling. JKH petitioned the California Supreme Court to review the case, but the petition was rejected. Thus, JKH has exhausted all its appeals and the ruling is final.

This ruling is interesting partly because of the fact that JKH was influenced into breaking the law by a “smart” lawyer. The attorney clearly thought that he could win this case, and that it would save the client a lot of money to falsely label employees as independent contractors. Instead, the suit ended up costing a fortune in legal fees.

Even when the case was lost in court, JKH’s attorney persisted. Apparently, he genuinely felt that he was in the right.

JKH tried to avoid paying employees paid meal breaks, overtime and other compensation as required by the state of California. Instead, the company ended up paying much more to attorneys to launch an expensive appeal. The company is now faced with compensating employees, plus paying penalties.

Several federal suits have had similar results, showing that neither the feds nor the state governments will allow this type of abuse by employers. In general, for a worker to qualify as an independent contractor, the workers must perform the job when and where he or she likes. The employer can set guidelines on the finished product, however any attempt to dictate when or in what manner the worker completes the job duties arguably creates an employer/employee relationship.