The question of whether the “ABC test,” codified under Assembly Bill 5 (AB5), covers joint employment has yet to be answered. AB5 doesn’t offer definitive clarification on joint employment. Nor has any California state court confirmed whether the “ABC test” can be used to determine joint employer liability.

Joint employment liability has been a central issue for years. Not only in the business community, but also for the Labor Department, the National Labor Relations Board, and the courts. Now, in the wake of Assembly Bill 5, which codifies the “ABC test” set by Dynamex West Operations Inc. v. Superior Court, joint liability takes on particular significance. In three separate cases, attorneys have asked the justices to review the scope of the “ABC test”. The three cases involved McDonald’s Corp., Shell Oil Co., and JanPro International as defendants. The attorneys asked whether the “ABC test” should also be used to determine if two or more businesses in a subcontractor relationship or a franchiser and franchisee relationship should share liability for labor and employment violations.

The ABC test, outlined in AB5, replaces a previous, more flexible test (Borello test) and makes it more difficult for companies to classify workers as contractors. It lays out three specific criteria employers must meet to classify its workers as contractors. Companies must show the following ‘factors’:

• “A”: The worker is free from the hirer’s “control and direction.”
• “B”: The worker is performing work “that is outside the usual course of the hiring entity’s business.”
• “C”: The worker is independently engaged in the trade for which the hiring company is seeking his or her services.

Conflicting Decisions

There have been conflicting court decisions regarding the application of Dynamex in terms of joint employment and liability.

In Vazquez v. Jan-Pro Franchising International, the U.S. Court of Appeals for the Ninth Circuit court sided with a group of workers suing JanPro for misclassification, establishing that they should have been considered employees and entitled to benefits. They ruled that the “ABC test” should apply to joint employment relationships and franchises, even though JanPro didn’t contract directly with these workers.

On the other hand, in both Curry v. Equilon Enterprises, LLC. (a subcontractor of Shell Oil) and Salazar v. McDonald’s Corp., the courts held that the ABC test didn’t apply in the joint employer context. In response, the workers in the Shell Oil case filed a petition for California Supreme Court review in November, and workers attorneys in the McDonald’s case also asked the court for clarification.

The California Supreme Court

At the moment, the California Supreme Court has yet to clarify whether this test used to classify independent contractors should apply broadly to franchises and joint employer relationships.

The California Supreme Court has previously ruled that franchisers have a legitimate right and duty to enforce their brands, trademarks, and system standards at franchise locations, but that isn’t evidence of liability. But in the face of the “ABC test,” these past rulings may not be applicable anymore.

As such, major business and franchise groups have demanded clarity on this issue, but to no avail. They have warned that there would be a negative impact if the court were to apply the test broadly. Businesses in the state would be harmed.

If you are a business in need of assistance with matters regarding joint employment and AB5 compliance, please contact Hackler Flynn and Associates.

DISCLAIMER: Content within this post should not be considered legal advice and is for informational purposes only. Communications made through this post do not create an attorney-client relationship. Hackler Flynn & Associates is not responsible for any content that you may access from third-party resources that may be accessed through or linked to this post. Hackler Flynn & Associates is only licensed to practice in California.

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