Fred Bowerman was a vendor for Field Asset Services, Inc. (FAS), which was a business engaged in pre-foreclosure property preservation. Under Bowerman’s contract with FAS, he was required to cover his own business expenses. Bowerman filed a lawsuit on behalf of himself and other class members alleging FAS willfully misclassified them as independent contractors rather than employees. One of his claims was the misclassification resulted in FAS’s failure to reimburse him for business expenses.
In March 2017, the district court granted partial summary judgment in favor of Bowerman by finding that the class members had been misclassified as independent contractors and FAS was liable for failing to pay their business expenses. The district court relied on the common law test for distinguishing between employees and independent contractors from S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (Borello test). The Borello test primarily considers whether the hiring entity has the right to control the manner and means of the work and then assesses a number of secondary factors about the service relationship
After FAS appealed the district court’s decision, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 in 2018, which established the ABC test for distinguishing between employees and independent contractors. The ABC test presumes a worker is an employee and only finds that a worker is an independent contractor if: (A) the worker is free from the control and direction of the hirer; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business.
The Ninth Circuit held FAS’s appeal in abeyance pending Dynamex. On appeal, FAS argued that the Borello test, and not the ABC test, applied to Bowerman’s reimbursement claim. The Ninth Circuit agreed with FAS. Bowerman’s expense reimbursement claims were based on Labor Code Section 2802, which requires employers to indemnify (or reimburse) employees for all necessary expenses incurred in the discharge of duties.
The Ninth Circuit held that Dynamex only applied the ABC test to wage order claims. Since Bowerman’s expense reimbursement claim was rooted in Labor Code Section 2802 and not a wage order, the ABC test did not apply to determine whether class members were employees for purposes of determining whether they were entitled to business expenses reimbursements. Thus, the Borello common law test, and not the ABC test, applies to expense reimbursement claims. The Ninth Circuit further assessed that there was evidence of both an independent contractor and employee relationship under the Borello test and reversed the district court’s decision that class members had been misclassified.
Bowerman v. Field Asset Services, Inc. (9th Cir. 2022) 39 F.4th 652, amended February 14, 2023.
NOTE:
After the Dynamex case, the Labor Code was amended to apply the ABC test beyond the wage orders, although not to expense reimbursement claims. The ABC test applies to employment status for Workers’ Compensation coverage and Unemployment Insurance coverage.