More Contractor Complications: Duffey v. Tender Heart and In-Home Caregivers

California law regarding independent contractors has been evolving rapidly ever since the California Supreme Court reversed decades of precedent last summer in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018). This caused complications for employers of in-home caregivers. That case further restricted employers’ ability to classify hourly-paid, non-exempt workers as independent contractors.  However, it was also intended to apply to those workers covered by the IWC Wage Orders, with their requirements for overtime, meal and rest breaks, etc.

Duffey v. Tender Heart Home Care Agency, LLC, decided by the California Court of Appeal on January 11, 2019, dealt with a category of employees not covered by the Wage Orders – domestic workers, specifically those who provide in-home care-giving services.  That category of workers is covered instead by the Domestic Worker Bill of Rights (Labor Code sections 1450, et seq) which was enacted in 2014. It provides, among other things, for overtime pay after 9 hours worked in a day or 45 hours worked in a week.

Tender Heart was an agency that screened, determined the qualifications of, and referred caregivers to clients.

Tender Heart signed contracts with clients and separately with caregivers, with the Caregiver Contracts specifying that they were independent contractors. Both the Client Contract and Caregiver Contract had hourly rate sheets, but the Client Contract’s rates included a combination of caregiver and agency fees. Caregivers could reject assignments and were free to work for other companies and clients.

Plaintiff sued Tender Heart for failing to pay overtime; Tender Heart moved for summary adjudication on the ground that the caregivers were independent contractors. The trial court granted summary adjudication, agreeing that the caregivers were independent contractors and not employees of Tender Heart. The appellate court reversed, finding that the trial court applied the wrong legal standard, and remanded for a determination of Plaintiff’s classification under the correct standard.

The trial court had applied the “common law” test for independent contractor classifications, as set forth in 1989 in S.G. Borello & Sons, Inc. v Department of Industrial Relations, 48 Cal. 3d 341 (1989).  The appellate court found that this was in error.  The court did not find, however, that the new Dynamex test should apply.  (Dynamex overturned Borello and mandated an “ABC” test which asks whether the hirer controls the worker, whether the worker is working within the hirer’s principal business, and whether the worker has an independent business.)  As the Court of Appeal noted in Tender Heart, Dynamex was expressly limited to cases arising under the IWC Wage Orders, and domestic workers were expressly excluded from those.

Instead, the Court of Appeal looked at the language and purpose of the operative statute – here,
The Domestic Worker Bill of Rights (DWBR).

The DWBR provides that “A domestic work employee who is a personal attendant shall not be employed more than nine hours in any workday or more than 45 hours in any workweek unless the employee receives one and one-half times the employee’s regular rate of pay….” Section 1454.  It defines a “domestic work employee” as “an individual who performs domestic work and includes live-in domestic work employees and personal attendants.” Section 1451(b)(1). It defines “domestic work employer” as “a person, including corporate officers or executives, who directly or indirectly, or through an agent or any other person, including through the services of a third-party employer, temporary service, or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of a domestic work employee.” Section 1451(c)(1).  Exceptions included employment agencies that meet certain criteria.  As the Tender Heart court noted, the DWBR does not define either “employ” or “independent contractor.”

The Tender Heart court then turned to the California Supreme Court’s opinion in Martinez v. Combs, 49 Cal. 4th 35 (2010) pertaining to joint employment relationships, to determine whether the Plaintiff should be classified as Tender Heart’s employee.  Martinez, which applies to cases involving temp agencies and other situations where more than one person or entity may control the work, held that a hirer was a joint employer if it controlled the “wages, hours, or working conditions” of a worker.

The court found that Plaintiff had put forward enough evidence to create a dispute of fact as to whether Tender Heart controlled the caregivers’ wages.  And, because under Martinez, an employment relationship exists when there is control over the “wages, hours, or working conditions” of the worker, the court found that it did not matter that Tender Heart did not also control the hours and working conditions. One out of three was sufficient, so the Court of Appeal reversed the grant of summary adjudication and remanded.

Tender Heart also raised a separate argument, claiming that it fell within the “employment agency” exception to the DWBR.

However, to prove that it was an “employment agency” and thus not an employer of the caregivers, Tender Heart’s Caregiver Contract would have needed to include certain specific provisions regarding payment, including how the “referral fee” would be paid, and that the worker could renegotiate the fee. Plaintiff had at least established a dispute of fact on these points, so the court could not uphold the summary adjudication ruling on this ground.

If you have further questions regarding Tender Heart or about employing domestic workers, please give us a call. Our experienced employment attorneys at Hackler Flynn Law can help you navigate this decision and many others that affect your business.  Hackler Flynn Law (323) 247-7030.

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