The California Labor Commissioner’s Office has taken aim at Mobile Wash, Inc., a business that offers a mobile app for on-demand car washing and detailing services, filing a lawsuit against the company and its president to enforce AB5, California’s controversial law designed to make it more difficult for businesses to engage workers as independent contractors.
As we wrote here, AB5 codified and expanded the “ABC test” adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.
To satisfy the ABC test, a hiring entity must demonstrate that:
- the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
- the worker performs work that is outside the usual course of the hiring entity’s business; and
- the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
In the lawsuit against Mobile Wash, the Labor Commissioner alleges that the company “made a calculated business decision to misclassify” car washers who perform services arranged through the company’s app as independent contractors, rather than employees.
Among other things, the Labor Commissioner contends that because Mobile Wash is allegedly a “car wash company in the business of selling car washes to its customers,” and the services that car washers perform are “central to the very purpose of Mobile Wash’s business,” the company cannot establish that the washers perform work outside of its usual course of business, as required under the “B” prong of the test.
The Labor Commissioner seeks to recover unpaid wages and overtime premium pay, unreimbursed business expenses (including costs associated with uniforms, car washing tools and equipment, insurance, cell phone service, and mileage), rest period premiums, misappropriated gratuities, waiting time penalties, and liquidated damages, on behalf of the allegedly misclassified car washers, as well as various civil penalties payable to the State of California. The Labor Commissioner asserts that the company’s president is also liable for the Labor Code violations alleged in the lawsuit.
In a press release, the Labor Commissioner—without acknowledging the significant entrepreneurial freedoms and opportunities available to “gig economy” workers, or the public backlash to AB5—noted that her office “is committed to combatting th[e] unlawful practice [of misclassifying workers as independent contractors] as a business model.” Accordingly, this is unlikely to be the Labor Commissioner’s last lawsuit seeking to enforce AB5.