In Adjusting to the Codification of Dynamex, be Cautious of the Joint Employer Doctrine
As has been widely reported, the State Assembly recently passed a law codified the Dynamex decision as the new law of California with respect to how to classify workers as “employees” or as “independent contractors.” See our discussion of the case here. Governor Newsom just signed the law and it goes into effect on January 1, 2019.
Some San Diego employers with workers currently classified as “independent contractors” will likely have to re-classify those workers. One solution that is available is to turn to staffing agencies and contract with such companies to achieve the same flexibility that is obtained by having independent contractors. Essentially, the staffing agency is the employer and will be responsible for providing the employees with various benefits that are mandated by the California Labor Code.
However, careful attention should be paid to the contract that your San Diego business signs with a staffing agency. You should retain an experienced San Diego corporate attorney to review such agreements. There are a host of legal issues that should be covered.
Among the concerns if you are planning to switch to a staffing agency is the “joint employer” doctrine. If the relationship with the staffing agency workers is deemed one of “joint employment,” then your company will be deemed one of the employers and you will be liable for the various rights that employees have under the labor laws. In other words, hiring workers from a staffing agency does not help if your company ends up being considered a joint employer; you company will liable for the benefits mandated by the labor laws.
What is the joint employer doctrine? Under California law, the joint employer doctrine is about control. The current test was established in the case of Martinez v. Combs where the court held that a joint employer relationship exists if any of these three circumstances exist:
- One or both employers exercise control over the various work conditions such as wages, hours, or working location, etc.
- One employer suffers or permits a person to work even though that person is nominally employed by another company/business, OR
- A common law employment relationship is created
The first option is the most common way that a joint employer circumstance arises. This is about control. To avoid being considered a joint employer, your company should avoid exercising any control over how the staffing agency employee does his or her work. The more control that is exercised, the more likely that there will be a finding that your company and the staffing agency are joint employers.
As a practical matter, sometimes avoiding the joint employer doctrine is not possible. This is why you must pay close attention to the agreement that is negotiated and signed with the staffing agency. The joint employer doctrine only kicks in if the staffing agency fails to provide the benefits that are due to the employees under the labor laws. Thus, the agreement with the staffing agency must clearly identify all of the obligations that must be met and must have vigorous indemnity, hold harmless, damages, and insurance coverage provisions.
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For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Lawh. Contact Mr. Leonard by calling (858) 483-9200 or via email. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Like us on Facebook.