Metropolitan News-Enterprise


Friday, May 12, 2023


Page 1


Court of Appeal:

Varying Statutory Tests for Worker’s Status Are Permissible

Wiley Sees No Equal Protection Impediment to Excepting Financial Professionals Such As Stock Brokers

 From Usual ‘ABC’ Standard for Determining If a Person Is an Employee or Independent Contractor


By a MetNews Staff Writer


The Court of Appeal for this district has upheld the constitutionality of a Labor Code provision that sets a different standard for determining whether a securities broker is an independent contractor or an employee than the yardstick applied to most workers, with the contention that the legislative scheme contravenes the federal constitutional right to equal protection being rejected.

Justice John Shepard Wiley Jr. of Div. Eight wrote the opinion, filed Wednesday. In it, he quoted Justice Oliver Wendall Holmes—in a “timeless dissent” to a “hated” 1905 U.S. Supreme Court opinion striking down a state regulation limiting employees of bakeries to a 60-hour-workweek—as cautioning against judicial legislation.

“It is a grave thing for unelected judges to strike down the work of elected representatives,” Wiley said, alluding to Holmes’s admonition in Lochner v. New York as to “the right of a majority,” through legislation, “to embody its opinions in law.” He commented:

“Where no binding authority compels us, this countermajoritarian difficulty restrains us.”

Invalidation Sought

The plaintiff and appellant, securities broker John Quinn, wanted Div. Eight to invalidate Labor Code §2750.3(b)(4). It provides that the “ABC test” set forth in the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court, does not apply to a “securities broker-dealer or investment adviser or their agents and representatives that are registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority or licensed by the State of California.”

  Sec. §2750.3, effective in 2020, was enacted in 2019 by the Legislature in AB 5, which, in general, codifies the decision in Dynamex, but provides for exceptions, such as the one in issue.

Under the “ABC test,” as set forth in Dynamex, an employer who claims that a worker is an independent contractor, must establish:

“(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

Under the exceptions delineated in §2750.3, the California Supreme Court’s 1989 opinion in S. G. Borello & Sons, Inc. v. Department of Industrial Relations still governs. There, it was decided that, generally speaking, a worker is an employee where the employer “retains all necessary control over a job which can be done only one way” but the opinion lists other factors to be taken into account.

Unresolved Issue

Wiley’s opinion does not resolve whether Quinn was an employee of, or an independent contractor for, LPL Financial LLC, which he sued in a putative class action under the Private Attorneys General Act for alleged wage-and-hour violations. What it establishes is that any such determination must be made under the challenged statute.

It affirms a stipulated judgment for the defendant that followed Los Angeles Superior Court Judge David Sotelo’s granting of summary adjudication as to the constitutionality of the statutory scheme.

Wiley wrote:

“This law has a rational basis. ‘Financial professionals,’ as Quinn’s stipulation described them, are professionals. A legislature rationally could believe professionals like Quinn, who ask people to trust them with wealth and finances, have more skill and bargaining power than the average worker, and therefore are less vulnerable to exploitation by misclassification as independent contractors….

“Professionals with superior bargaining power may need less protection in the marketplace than others. A labor regulation treating financial professionals differently from others is rational.”

He commented:

“Defining classes of people subject to legal requirements inevitably places those with almost equally strong claims on the other side of the line. Whether the line could or should have been drawn differently is a matter for legislative, not judicial, consideration….Problems of government may justify or require rough accommodations, and even illogical and unscientific ones.”

Due-Process Challenge

Quinn also asserted that he was denied due process by virtue of the application of Labor Code §2750.3(i)(2) which renders the exception in §2750.3(b)(4) retroactive. He had worked for LPL Financial LLC from May 13, 2019 to Nov. 22, 2019, prior to the effective date of AB 5 which created the two disputed statutes.

Sec. 2750.3(i)(2), he maintained, contravenes a vested employment right he held.

Disagreeing, Wiley said:

“Quinn’s opening brief cites no precedent giving him a “vested right” to a particular legal test or presumption.  Courts and legislatures routinely change or modify legal tests.  For courts, this is the method of the common law:  continual and incremental legal adjustments to newly-encountered fact patterns—adjustments that then stand as precedents for the future.  Absent precedent, Quinn’s challenge lacks an authoritative footing.”

The case is Quinn v. LPL Financial LLC, 2023 S.O.S. 1427.

 Attorneys on appeal were James F. Clapp of the Carlsbad firm of Clapp & Lauinger and Larkspur attorney Edward J. Wynne for Quinn and Jon D. Meer and Paul J. Leaf of the Century City firm of Seyfarth Shaw for LPL.

The Financial Industry Regulatory Authority on Dec. 16, 2021, imposed a $10,000 fine on Quinn and suspended him from serving as a securities broker for the period from Dec. 20, 2021 until next July 19 based on outside business activities in conflict with an agency rule.


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