IMPORTANT CHANGES FOR CA COMPANIES USING INDEPENDENT CONTRACTORS
As an employment litigator for many years, I believe it is imperative to educate employers and employees as to their respective rights and obligations they each must observe, and indeed follow, while interacting in the workplace. Ignorance of the law is simply a time bomb for costly litigation to ap
CA SUPREME COURT REVIEW OF CONTRACTOR STATUSDetermining whether a California worker is an independent contractor or an employee has never been an exact science, with a lot riding on correct classification. However, the California Supreme Court recently tried to simplify the issue by adopting a new "ABC" test for California, at least for claims under the IWC Wage Orders for minimum wage, overtime pay, and meal and rest period violations.
DYNAMEX CASEIn Dynamex Operations W, Inc. v Superior Court (20 18) 4 C5th 903, the plaintiffs were delivery drivers who filed a class action claiming that Dynamex had misclassified them as independent contractors. The supreme court agreed. It found that under the "suffer or permit to work" definition of "employ" found in California Wage Orders, a worker is presumed to be an employee and the hiring business must satisfy all three prongs of the ABC test to overcome that presumption.
FACTORS TO LOOK AT TO DETERMINE CONTRACTOR STATUSSpecifically, the hiring business must show:
(A) 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. (This is similar to the test in S.G. Borello & Sons, Inc. v Department of Indus. Rel. (1989) 48 C3d 341 that was used in the past.)
(B) The worker performs work that's outside the usual course of the hiring entity's business. (So, for example, if you're a driver for a ride service or a delivery person for a delivery service, you can't be an independent contractor no matter how little control the company has over you.)
(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. (The court will look at such things as whether the worker's business is incorporated or licensed, whether it's advertised, and whether it offers services to the public or other potential customers.)
Although some have accused the court of ignoring the realities of the gig economy, the ABC test is already used in other jurisdictions, and in the court's view, "will provide greater clarity and consistency, and less opportunity for manipulation, than a test or standard that invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis." 4 C5th at 964.