Nothing to See Here: Dynamex and LAWCLERK

It has been nearly a year since the California Supreme Court decided Dynamex Operations W. v. Superior Court^[1], seemingly establishing a new framework to classify a worker as an employee or independent contractor. The decision created worry across the freelance industry, including for California-based users of LAWCLERK, who understandably queried whether the LAWCLERK model was compliant with California labor laws.

            Back in October, I wrote that Dynamex did not spell the end of the LAWCLERK model in California. Now, with the benefit of an even larger universe of case law assessing Dynamex and its implications, the time is right to ask the question again. This is especially so because, even after all of this time, a significant number of attorneys do not understand the basic facts underlying Dynamex and the extremely limited scope of its reach. It is thus vital to get the facts straight and recognize the limited risk faced by Attorneys hiring Lawclerks through LAWCLERK.

1.           Clearing up the facts

First and foremost, it is critical to understand that, in Dynamex, the workers challenging their classification as independent contractors served as same-day couriers for Dynamex — a nationwide same-day courier and delivery service. The lawsuit hinged upon the fact that prior to 2004, Dynamex treated its couriers as employees. After 2004, though, Dynamex couriers were reclassified as independent contractors, yet still performed the same functions as when they were employees; that is, that they worked dedicated delivery routes or on-demand, were required to notify Dynamex ahead of time of the days they wished to work, and were to conduct their work in Dynamex uniforms, among many other characteristics. Primarily, all that had changed was a significant decline in compensation and benefits.

It was within this unique context then that the California Supreme Court held that, pursuant to California Wage Order No. 9,[2] these transportation industry workers were misclassified. The Court emphasized statutory purpose underlying wage orders:

Wage and hour statutes and wage orders were adopted in recognition of the fact that individual workers generally possess less bargaining power than a hiring business and that workers’ fundamental need to earn income for their families’ survival may lead them to accept work for substandard wages or working conditions. The basic objective of wage and hour legislation and wage orders is to ensure that such workers are provided at least the minimal wages and working conditions that are necessary to enable them to obtain a subsistence standard of living and to protect the workers’ health and welfare.[3]

The California Supreme Court thus decided the standard to be applied “in one specific context”: “whether workers should be classified as employees or independent contractors for purposes of California wage orders, which impose obligations relating to the minimum wages, maximum hours, and a limited number of very basic working conditions . . . of California employees.”[4]

As assessed below, this context is a far cry from the scenario under which Attorneys and Lawclerks function under the LAWCLERK model.

2.         What have the courts had to say?

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.^[5] In the year since, though, that fear has not come to fruition.

Universally, state and federal courts have held that Dynamex is extraordinarily limited in scope. 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.”[6]

The intermediate appellate courts in California have all agreed with this position. So, when it comes to labor code violations,^[7] joint employment cases,^[8] the Domestic Workers Bill of Rights,[9] and claims outside of wage orders,^[10] the common law standard of Borello still predominates. Significantly, courts have agreed that the employee-independent contractor distinction is a question dependent entirely upon interpretation of the specific statute under which the claim arises.

As the opinion in Dynamex so stated: “because the Borello standard itself emphasizes the primacy of statutory purpose in resolving the employee or independent contractor question, when different statutory schemes have been enacted for different purposes, it is possible under Borello that a worker may properly be considered an employee with reference to one statute but not another.”[11]

Accordingly, if an Attorney funds a project on LAWCLERK adequately enough to satisfy the (very low) burden of minimum wage, then it stands to reason that Dynamex will never even be contemplated, as Borello would likely apply to all other aspects of the relationship. For instance, while an Attorney may be required to offer a Lawclerk a minimal level of pay, that does not mean that the Attorney would necessarily be subject to worker’s compensations for that Lawclerk, for paying payroll taxes, or for offering health insurance or other benefits.

3.        What is the practical risk?

So, is there a risk to Attorneys hiring Lawclerks in California? Technically, as a lawyer of course I’m going to have to say the answer is yes, but that answer belies the reality of the situation.

In particular, California wage orders aim to provide only subsistence-level wages and basic benefits for employees. The wage orders exist and provide a remedy for those facing sub-subsistence level wages and working conditions. So, it is possible that a Lawclerk could file a lawsuit against an Attorney under the wage orders for certain violations. In reality, though, an Attorney need only be concerned if, somehow, she was hiring Lawclerks below the minimum wage which is currently $11 per hour in California which is unlikely even in the realm of freelance legal work

Furthermore, from a practical standpoint, Dynamex has had very little impact upon industries much more closely related to the courier industry. Most significantly, Uber and Lyft still exist and are still thriving. As recently as last week, Uber prevailed through settlement of litigation in California and Massachusetts,[12] agreeing to pay its drivers $20 million, but retaining their status as independent contractors.[13] Thus, despite certain prognostications of doom,[14] Uber’s independent contractor model still exists.

So, at this point, Dynamex has not had the impact upon industries across California that many initially feared, even those in close proximity to Dynamex. Going forward, it will be important to monitor whether that remains the case, or whether some level of creep will occur over time, spreading the scope of Dynamex. But, as of this writing, the sky shows no sign of falling on the gig economy.

4.        Are there means of protection even from unlikely risk?

If an Attorney based in California is concerned about this very low risk, though, there are practical measures that can be undertaken to provide protection. First, an Attorney can set an expectation and/or limitation of hours in the job description of a project, which would thus become part of the contract. This would thus be reinforced by the mandatory entry of hours upon final submission of a project on Lawclerk, which would thus measure whether an Attorney is paying the Lawclerk minimum wage. As stated above however, it is highly unlikely that an Attorney would ever be placed in such a position that payment below minimum wage would even be possible, given the practical fact that no qualified attorney would bid on such a project.

Finally, an Attorney in California could avoid this issue altogether by simply hiring a Lawclerk who works outside of the state of California. Generally, employees are only subject to the laws of the state in which they work. Under the basic principles of federalism, California’s wage orders are unlikely to reach Lawclerks based out of Hawai’i, Florida, Ohio, or Massachusetts. Thus, an Attorney may avoid the very low risk of running afoul of California wage orders by hiring outside of the state.  The LAWCLERK platform helps attorneys connect with freelance lawyers from all over the United States and keeps them ethically compliant by limiting their scope of work to that of a paraprofessional who can do research, write, and help with discovery – all under the hiring attorney’s supervision.

5.         Conclusion

Nevertheless, these means of protection, are simply unnecessary as of this writing because the wage orders are unlikely to have any meaningful impact on the LAWCLERK marketplace. As such, this Lawclerk would encourage California Attorneys to continue to hire near and far depending solely upon the needs of the given project.

While Dynamex may have created a lot of noise this past year, there is ultimately nothing to see here as far as LAWCLERK is concerne