Case Law Update

In recent cases, we have good news and bad news. First, a ray of hope. In a published case decided on April 10, 2019, the court ruled that an employee who refused to sign an arbitration agreement is still bound to its terms where she accepted continued employment. The question in Erika Diaz v. Sohnen Enterprises (2019) 245 Cal.Rptr.3d 827, was whether an employer could require at-will employees to be compelled to a new dispute resolution program simply by continuing to work after being told that the program was a mandatory condition of employment. The appellate panel ruled 2-1 that even though the employee did not sign the arbitration agreement, and even expressly objected to it, she would be forced to arbitrate her discrimination suit under the principle of "acceptance by conduct." In essence, the Court would not permit the employee to enjoy the benefit of employment without the conditions that come with it. This welcome ruling should cause a warming trend for implementation of appropriate arbitration programs as a condition of continued employment.

And then there’s the bad. Remember the severe burn employers got from Dynamex last year? Employers are still stinging from that decision, which effectively gutted the wall between employees and independent contractors in California. But left unanswered was whether the Dynamex ruling applied retroactively. In Vasquez v. Jan-Pro Franchising International, Inc., the Ninth Circuit ruled unanimously that it does.

Like our TV weatherpersons predicting another week of scorching temps, many of our colleagues predict that the Dynamex/Jan-Pro duo will unleash a blaze of class-action and PAGA suits. What is astonishing is that employers who were previously insulated by their classification model are no longer protected in the post-Dynamex world. This may not end with wage issues. Our firm is already involved in an instance where Dynamex has apparently emboldened the EDD to audit one employer’s broad array of independent contractors, who function in a “gig” economy. Even more astonishing, this same employer recently prevailed on a misclassification challenge brought by a former independent contractor. Unfortunately, that was all pre-Dynamex. What does that mean for employers? Not only can there be misclassification liability for unpaid wages potentially going back four years – there may also be liability for taxes and other paycheck withholdings.

Sacramento needs to do something to plug this growing hole in the ozone layer of our legal atmosphere. Otherwise, the pleasant weather won’t be enough to keep employers here, and that will burn the very employees the politicians claim to be protecting. And SPF 50 won’t cut it.


Stephanie M. Stringer, Hall Griffin, Associate

John A Cone, Jr., Hall Griffin, Of Counsel

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