Category: Daily News

California has clearly established a very liberal test to resolve the classification of an employee or independent contractor by its passage of AB-5 which codified the A-B-C test. For workers’ compensation claims under California jurisdiction, the A-B-C test is appropriate. However employers with out-of-state employees need to be aware that there are other standards.

The saga of the Department of Labor’s (DOL) standards for determining independent contractor status under the Fair Labor Standards Act (FLSA) is a classic case of policy ping-pong, with each administration lobbing its preferred test across the net. Let’s break down the three key changes across the Trump and Biden administrations, culminating in the DOL’s Field Assistance Bulletin No. 2025-1 on May 1, 2025, with a clear narrative of how this unfolded.

In January 2021, during the final days of President Donald Trump’s first term, the DOL published the “Independent Contractor Status Under the Fair Labor Standards Act” rule, known as the 2021 IC Rule, effective March 8, 2021 (though its implementation was later delayed). This rule marked a significant shift from decades of precedent by introducing a streamlined, business-friendly framework for classifying workers as independent contractors rather than employees under the FLSA. The 2021 IC Rule established a five-factor “economic reality” test, with two “core” factors given greater weight.

– – Nature and degree of control over the work: If workers had significant control over their schedules, methods, or ability to work for others, they were more likely to be independent contractors.
– – Opportunity for profit or loss: Workers who could increase earnings through initiative, investment, or managerial skill leaned toward contractor status.

Three additional “non-core” factors – skill required, permanence of the working relationship, and whether the work was part of an integrated unit of production – were considered less probative and rarely outweighed the core factors. The rule emphasized actual practices over contractual labels, but its focus on control and profit opportunity made it easier for businesses to classify workers as independent contractors, exempting them from FLSA protections like minimum wage, overtime pay, and benefits. Business groups, particularly in industries like gig work (e.g., Uber, Lyft), praised the clarity and flexibility, while labor advocates argued it risked worker misclassification and eroded protections.

However, the rule barely saw the light of day. With Trump’s term ending on January 20, 2021, the incoming Biden administration quickly moved to halt its implementation.

Upon taking office in January 2021, the Biden administration targeted the 2021 IC Rule for reversal, viewing it as inconsistent with the FLSA’s purpose and judicial precedent. The DOL, under Acting Secretary Julie Su, took a two-step approach. First, in May 2021, it delayed and then formally withdrew the 2021 IC Rule, arguing that its elevation of two core factors (control and profit/loss) deviated from the traditional “totality of the circumstances” economic reality test used by courts for decades. A Texas federal court briefly reinstated the 2021 rule in March 2022, ruling the withdrawal unlawful, but the DOL’s appeal was stayed as it worked on a new rule.

On January 10, 2024, the Biden DOL published its final rule, effective March 11, 2024, known as the 2024 Independent Contractor Rule. This rule rescinded the 2021 IC Rule and reinstated a six-factor economic reality test, applied holistically with no single factor carrying predetermined weight.

With Donald Trump’s return to the presidency in January 2025, the DOL, now led by Secretary Lori Chavez-DeRemer, signaled a retreat from the Biden-era 2024 rule. On May 1, 2025, the DOL’s Wage and Hour Division issued Field Assistance Bulletin (FAB) No. 2025-1, a pivotal move that effectively paused enforcement of the 2024 rule.

The bulletin instructed DOL field staff not to apply the 2024 rule’s six-factor test in FLSA enforcement actions where no back wages or civil penalties had been paid as of May 1, 2025. Instead, staff were directed to use a 2008 DOL Fact Sheet (#13) and a 2019 Opinion Letter (FLSA2019-6) for guidance, both of which align more closely with the Trump-era 2021 IC Rule’s emphasis on economic reality factors like control and profit opportunity.

The FAB clarified that the 2024 rule remains in effect for private litigation, meaning employers could still face lawsuits under its standards until it is formally rescinded. However, the DOL’s non-enforcement stance reflects a return to the Trump administration’s preference for a more employer-friendly framework, likely foreshadowing a formal rulemaking to restore the 2021 IC Rule or a similar standard.

Javier Hernandez was employed as a farm laborer by Ceja Reyes, Inc., a farm labor contractor located in Woodland. Ceja Reyes provides agricultural workers to businesses that need them. During his employment with Ceja Reyes, Hernandez was only assigned to work at one site in Winters, which was approximately 60 miles from his home in Yuba City.

Ceja Reyes does not provide transportation to its employees. Its employment contract with Hernandez specified that it did not make transportation arrangements, did not recommend any type of transportation, and Hernandez was solely responsible for his transportation.Hernandez testified that he does not have a driver’s license, does not own a car, and does not drive. He said there was no “reasonable public transportation” that would have taken him from his home to the jobsite.

Another Ceja Reyes employee arranged the vanpool that Hernandez used to travel to and from work as a personal side business independent of their employer. To motivate workers to use the vanpool, the vanpool operator held himself out as a supervisor for Ceja Reyes, even though he was not one. Hernandez’s actual supervisor at the work site told workers that the van owner was in charge of them when they were “using the van.” The supervisor also observed the workers being delivered to the job site, and once he saw they arrived, he assigned each worker his duties.

In May 2022, during Hernandez’s commute home, the van crashed in Yolo County. At the time, the van was being driven by the son of the organizer of the vanpool. This driver did not have a California driver’s license, and the van was not certified to be used as a farm labor vehicle. He filed a workers’ compensation claim and alleged that he sustained catastrophic injuries including a right leg amputation. Zenith Insurance denied the claim after concluding his injury was barred by the Going and Coming rule. A WCJ concluded Hernandez’s claims came within the special risk and dual purpose exceptions to the going and coming rule and awarded benefits. The WCAB denied Zenith’s petition for reconsideration.

The Court of Appeal agreed with Zenith that the exceptions relied upon by the Board do not apply. It annulled the Board’s order and remanded the case for further proceedings in the published case of Zenith v WCAB – C101549 (May 2025).

The California Supreme Court “devised a two prong test to determine applicability of the special risk exception. . . . [T]he exception will apply (1) if ‘but for’ the employment the employee would not have been at the location where the injury occurred and (2) if ‘the risk is distinctive in nature or quantitatively greater than risks common to the public.’ ” (Parks v. Workers’ Comp. Appeals Bd. (1983) 33 Cal.3d 585,590.)

The Court of Appeal noted that “The Board applied the two-prong test but neither the Board nor Hernandez supply any authority for rendering the zone of employment exception as large as an entire commute.” And went on to note “The Board concluded Hernandez was required to be on the road longer, for more miles, and on a different route and was riding in a van that was not legally registered as a farm labor vehicle, and driven by a person, on the day of the accident, who did not possess a valid driver’s license. “All these were unique and special risks created by [Ceja Reyes] in hiring a person who could not drive, had no car, and had no driver’s license, and who needed to reliably be at work on time sixty miles away from his home.” On appeal, Hernandez argues the general public would not be involved in this type of transportation or recruited to be in it.

“These arguments, to the extent they deviate from the normal risks of commuting to the general public, are based on the nature of the employee, as a person who is not licensed to drive, and not any circumstances of the employment over which the Board properly found the employer had any knowledge or control.”

“There is no support in the record for the suggestion that Ceja Reyes was aware Hernandez could not drive. “An award of compensation may not be based on surmise, conjecture, or speculation.” (3 Stonedeggs, Inc. v. Workers’ Comp. Appeals Bd. (2024) 101 Cal.App.5th 1136, 1149.) “The Board’s logic stretches the special risk exception far beyond prior case law and creates an exception that could apparently apply any time an employer hires a person without a driver’s license or a car. We agree with Zenith that the Board erred in applying the special risk exception to these facts.”

“Zenith argues that, contrary to the Board’s conclusion, the dual purpose exception to the going and coming rule does not apply. Again, the facts of this case do not meet threshold requirements in the authority upon which the Board (and Hernandez in this court) relies: ‘In proper circumstances, the dual purpose exception applies to a local commute to and from the place of employment when the employee performs work at home.’ (Bramall v. Workers’ Comp. Appeals Bd. (1978) 78 Cal.App.3d 151,156, emphasis added.)”

“Hernandez essentially argues he performed work while on the van. He argues Zenith failed to accept the Board’s finding of fact that workers would receive their job assignments for the day while they were physically in the van. The Board made no such finding. Rather, it explained that “[Hernandez]’s supervisor . . . observed the workers being delivered to the work site, and once he saw that they had arrived, assigned each worker his duties.” The remainder of Hernandez’s argument cites the fact that the Board found that “[Hernandez]’s actual supervisor. . . told the workers that the van owner was in charge of them when they were using the van.” This ambiguous statement does not support the notion that they performed work on the van or at home. The Board erred in applying the dual purpose exception to these facts.”

Angel D. Chavez Reyes filed his original class action complaint and asserted 12 causes of action against Hi-Grade Materials Co. and Robar Enterprises, Inc. for various Labor Code violations such as overtime, minimum wage, and meal break violations.

Chavez filed a motion for class certification in March 2023. Defendants filed their opposition in July 2023, and Chavez filed a reply soon after. The trial court heard oral argument on Chavez’s motion simultaneously with another class certification motion in a related class action lawsuit filed against defendants. Although the two lawsuits were filed two weeks apart and alleged “nearly identical ‘wage and hour’ claims on behalf of overlapping putative classes,” no party ever moved to consolidate the two cases.

The trial court issued its ruling denying class certification in both cases in August 2023. In short, the court found that the plaintiffs failed to demonstrate that the proposed class action was manageable; and they also failed to demonstrate the superiority of class adjudication. For all of these reasons, the court denied the “combined motion for class certification” and directed that the two lawsuits “proceed separately as individual claims.”

The trial court also noted in its order that Chavez had also asserted claims for penalties under PAGA, but that the PAGA claims are “not subject to class certification and [are] therefore not addressed in the motion or in this ruling.”

Chavez filed a notice of appeal stating that he was appealing from an “[o]rder denying class certification, immediately appealable under the Death Knell Doctrine.” The Court of Appeal dismissed the appeal for lack of jurisdiction in the published case of Reyes v. Hi-Grade Materials Co. CA4/1 – D085178 (April 2025)

The right to appeal in California is generally governed by the “one final judgment” rule, under which most interlocutory orders are not appealable. This rule is a fundamental principle of appellate practice that precludes a party from appealing until there is a final judgment resolving the entire action. Piecemeal disposition and multiple appeals in a single action are oppressive and costly, and a review of intermediate rulings should thus await the final disposition of the case.

The death knell doctrine is a “tightly defined and narrow” exception to the one final judgment rule in the class action context. An order denying class certification is generally not a final judgment, as it leaves the action intact as to the individual plaintiff’s claims.

Under the death knell doctrine, however, an order is appealable if it effectively terminates the entire action as to the class, in legal effect being “tantamount to a dismissal of the action as to all members of the class other than plaintiff.”

Chavez contends the death knell doctrine applies here because the trial court’s August 2023 order denying class certification stated that the action would proceed only as to his individual claims. Defendants dispute this, pointing out that, in addition to his class and individual claims, Chavez also brought representative claims for civil penalties under PAGA.

In response, over a year after filing this appeal, Chavez voluntarily dismissed his PAGA claims without prejudice in the trial court. The Court of Appeal was therefore confronted with a novel jurisdictional question: Can a putative class action plaintiff unilaterally ring the death knell for the entire class and retroactively create appellate jurisdiction by voluntarily dismissing all remaining representative claims long after class certification has been denied?

“We conclude that the answer is no. Chavez is attempting to appeal a nonappealable order, as his PAGA claims remained viable and pending at the time he filed his notice of appeal. His voluntary dismissal of the remaining PAGA claims over a year later was not itself appealable and did not retroactively make the class certification order appealable. We therefore conclude the death knell doctrine does not apply here, and we do not have jurisdiction to entertain Chavez’s appeal from the order denying class certification. Any appeal of the class certification order must now await entry of a final judgment disposing of all claims.”

Total costs per workers’ compensation claim rose between 2 and 14 percent annually from 2021 to 2023 across 18 states, according to a new set of studies from the Workers Compensation Research Institute (WCRI).

“Total cost per claim is a widely used measure for policymakers and system stakeholders to gauge how their system is performing compared to other states. It combines three components – indemnity benefits for lost wages, medical payments, and benefit delivery expenses per claim,” said Sebastian Negrusa, vice president of research at WCRI. “While it’s a key metric, it’s just one of many measures that these studies track to provide a comprehensive view of system performance.”

The increase across the board in total costs per claim reflects changes in access to medical services and labor market conditions since the early pandemic years, particularly the recent rise in short-tenure workers as a share of claims. Although all states showed an upward trend in total costs per claim, the measure masks important nuances:

– – Delaware: Total costs per claim increased 7 percent per year in Delaware from 2021 to 2023, primarily driven by rapid growth in wages and temporary disability duration.
– – Florida: Wage growth in Florida accelerated in 2022 and then moderated in 2023, cooling the increases in indemnity benefits and resulting in growth of 4.5 percent per year in total costs per claim.
– – Minnesota: Total costs per claim in Minnesota grew 10 percent per year from 2021 to 2023, mainly driven by increases in wages, duration of temporary disability, and medical payments per claim.
– – New Jersey: Costs per claim in New Jersey increased about 8 percent annually from 2021 to 2023, largely driven by wage growth, especially for new hires and short-tenure workers.
– – Virginia: The 7.4 percent average growth in Virginia total costs per claim since 2021 was driven by increasing indemnity benefits and benefit delivery expenses per claim, but partially offset by declining medical payments.

The studies, CompScope™ Benchmarks, 2025 Edition, provide ongoing annual monitoring of how indemnity benefits, medical payments, and benefit delivery expenses in 18 states compare and how they have changed over time. The 18 states in the study include California.

The studies cover claims through March 2024, focusing on non-COVID-19 claims, and track how pandemic-related disruptions and labor market shifts affected claims from 2019 to 2023. For more information on these studies or to download copies, visit www.wcrinet.org.

The San Joaquin County District Attorney’s Office recently received a Felony Workers Compensation Fraud Conviction, highlighting the Office’s commitment to fighting Workers Compensation fraud and abuse in San Joaquin County.

Stacy Johnson, a male, pled guilty to two felonies: PC 487 Grand Theft and PC 550(b)(3), Insurance Fraud.

Johnson was sentenced to 4 months in County Jail, 2 years of Felony Probation and will have to pay $3,000 in investigative costs restitution, and $2,000 in restitution to his former employer, Amazon, to cover the stolen goods.

Prosecutors say Johnson conspired with other assailants to stage a robbery of an Amazon delivery truck that Johnson was driving for his employer Amazon.

Johnson then initiated a fraudulent Workers Compensation Claim stemming from the faked robbery, claiming “physiological injuries and stress”.

Had the fraud not been caught, the loss would have been an estimated $35,000, the cost of which, would most likely have been passed on to consumers.

“Workers Compensation Fraud is NOT a victimless crime, it affects all of us”, said San Joaquin County District Attorney Ron Freitas. It leads to increased costs on our local businesses, and increased costs for the goods we purchase on a daily basis.”

“Combined with our ongoing Workers Compensation Fraud outreach campaign, we are making a point of making sure criminals know that San Joaquin County is not a safe haven for Workers Compensation Fraud, we will prosecute”.