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Supreme Courts Redefines Independent Contractors
On April 30, 2018 the California Supreme Court in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County held that there is a presumption that an individual is an employee, not an independent contractor. An entity classifying an individual or entity as an independent contractor bears the burden of establishing that such a classification is proper under the new 'ABC Test." If no state wage order applies to the individual or entity, an independent contractor must meet all three tests:
- 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.
Employers who use "independent contractors" need to carefully determine that they meet all three tests because in any litigation the employer will have to convince the court of that fact. If an individual or entity fails any one of the tests, the court will find that the individual or entity is an employee and subject to California laws and rules relating to wages, hours, benefits and the like.
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