In the Wake of Dynamex, AB5 Cleared the Path for Freelance Lawyers

Originally published by the California Lawyers Association in The Practitioner Winter 2020, Volume 26, Issue 1:  available HERE.  

The gig economy is changing the way millions of people are living and working.  Companies such as UberEATS, Airbnb, Fiverr, Lyft and countless others have become an integral part of our daily lives and how we receive services like travel, housing and, food, but also, how we manage our legal practice.

The legal community has been embracing the gig economy for decades before the phrase “gig economy” was coined and became so prevalent.  Busy attorneys have turned to so-called “contract attorneys” for many years to get briefs written, documents reviewed, and issues fully researched.  The more modern term for these “contract attorneys” is “freelance lawyers” but whatever you want to call them their role is clear: to provide needed support to busy attorneys to get legal work completed in an efficient manner. However, in light of Dynamex Operations W v. Superior Court[1] many California attorneys have reevaluated whether they can hire these freelance lawyers without legal consequence.

Dynamex is a California case from 2018 having a big impact on the gig economy and freelance workers across many industries.  The ruling seemingly established a new framework to classify workers as employees or independent contractors.  The decision created worry across the freelance industry, including for California-based lawyers, who understandably queried whether hiring freelance lawyers was compliant with California labor laws.

Some attorneys have interpreted the Dynamex holding to mean that they can no longer hire freelance lawyers to assist in drafting and preparing legal work.  This is a misinterpretation of the Dynamex ruling.  Further, AB5 swiftly wiped out any reason for busy California attorneys to give pause about hiring freelance lawyers. Let’s examine.

WHAT IS DYNAMEX?

The Dynamex case involved two workers suing on behalf of a class and challenging their classification as independent contractors.  These individuals worked as same-day couriers for Dynamex — a nationwide same-day courier and delivery service[2]. The lawsuit hinged upon the fact that prior to 2004, Dynamex treated its couriers as employees. After 2004, they were reclassified as independent contractors, yet still performed the same functions as when they were employees. Pretty much the only thing that had changed was a significant decline in compensation and benefits.[3]

It was up to the court to decide whether the workers should be classified as employees or independent contractors for purposes of California wage orders.[4]

What are wage orders? Wage orders impose obligations relating to the minimum wages, maximum hours, and a limited number of very basic working conditions for California employees.

In Dynamex, the court held that the workers were misclassified as independent contractors and they should be classified as employees and thus subject to the California wage order laws.  Further, the Dynamex Court established a new ABC test (“Test”) to determine if a worker is an employee or an independent contractor.[5]  The Test presumes that all workers are employees.

DYNAMEX FEARS

The fear among those in industries dependent upon — or thriving because of — freelancers was that Dynamex would replace the common law employment test set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations[6]. In the subsequent cases since Dynamex, this fear has not come to fruition.

As summed up by the Ninth Circuit in California Trucking Association v. Su: “Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.”[7]

The intermediate appellate courts in California have all agreed with this position. So, when it comes to labor code violations,[8] joint employment cases,[9] the Domestic Workers Bill of Rights,[10] and claims outside of wage orders,[11] the common law standard of Borello still predominates.

Universally, state and federal courts have held that Dynamex is extraordinarily limited in scope and it did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections.

ENTER AB5

AB5 is groundbreaking legislation which will alter the ability of many companies to claim workers as independent contractors.  AB5 codified the Test set forth in Dynamex and created a presumption that workers should be classified as employees.  Classifying workers as employees triggers a number of benefits for those workers including overtime pay, paid sick leave, worker’s comp benefits and unemployment insurance.   From the employers’ standpoint these benefits are incredibly expensive but to the worker they are invaluable.

The intent of AB5 is to limit the ability of companies to classify workers as independent contractors rather than employees in the state of California. The big distinction in the classification is the fact that employees get greater labor protections, such as minimum wage laws, sick leave, and unemployment and workers’ compensation benefits while independent contractors do not. Of course, these protections come at an expense for employers. The underlying force behind the intorduction of AB5 were growing concerns about employee misclassification, especially in the gig economy.

AB5 EXEMPTS LAWYERS

Now to the important part as it pertains to busy attorneys and the use of freelance lawyers.

AB5 carved out a specific exemption for an individual who holds an active license from the State of California and is practicing in a one of several recognized professions including lawyers.[12]  Other recognized professions which were exempted include architects, engineers, private investigators, and accountants.

What does this mean for busy attorneys hiring freelance lawyers?  If you had any concerns about Dynamex before those should be alleviated with the passage of AB5 and the clear exemption for freelance lawyers.

BENEFITS OF FREELANCE LAWYERS 

Outsourcing legal services offer many benefits to busy solo attorneys and firms of all sizes. These include:

1. Make more money. Outsourcing can improve your bottom line by leveraging the time, talent and expertise of freelance lawyers. Currently, there is an overabundance of graduating lawyers and the big law “up or out” system is creating thousands of talented and available lawyers with specialized knowledge. You can take advantage of this and get skilled attorneys at reasonable rates on a freelance basis.

2. Expand your practice area expertise. With outsourcing, you can meet your clients’ needs by selecting skilled freelance lawyers who have subject matter legal expertise in other areas of the law.

3. Achieve flexible staffing for your cases. By using freelance attorneys, you can get help when you need it. You can find qualified legal help at any skill level for any project. You can get assistance with preparing memos, agreements, pleadings, written discovery, and other types of work.  And unlike the traditional full-time associate, you don’t have to pay the freelancer when you are noy busy and do not need their help.

4. Move away from the billable hour toward flat fee billing. Outsourcing allows you to engage talented lawyers in a paraprofessional capacity on a flat fee basis to assist you with discrete projects. As a result, you can charge your clients a set fee for legal work instead of hourly billing, which is more frequently being demanded by clients and gives you a marketing advantage.

5. Lower the cost of legal services and be more competitive in the market. Outsourcing is often more economical than hiring attorneys because of the overhead costs employees add to your business. Those savings can be passed along to your clients, which gives you a competitive advantage.

6. Find work/life balance. Solos and small firms are under more pressure than ever to work constantly in order to make a profit. By using freelance lawyers, you can bring in extra help when you need it without the overhead of a full-time associate, thereby giving you more time with your friends, family, and hobbies.

Despite the fears generated by Dynamex, California attorneys can continue to see the aforemtentioned benefits – and more – from working with freelance lawyers thanks to the clear exemption set for lawyers by the passage of AB5.

ABOUT THE AUTHOR

Kristin Tyler is Co-Founder of LAWCLERK (www.lawclerk.legal), where attorneys go to hire freelance lawyers.  She is also a trusts and estates lawyer, busy mom and firm believer that the practice of law can be rewarding despite its daily demands.