California Supreme Court Restricts Use of Independent Contractors
In a landmark decision, the California Supreme Court redefined the test for determining whether workers should be classified as independent contractors or employees. The Court adopted a new standard of presuming that all workers are employees rather than contractors and positioned the burden of proof on the organization classifying the individual as an independent contractor. The Court adopted what is called the “ABC Test.” Here are those parameters:
- 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;
- that the worker performs work that is outside the usual course of the hiring entity's business; and
- that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
The case, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, centered on the drivers for a California-based delivery company. Some of their job requirements involved wearing corporate uniforms, putting corporate logos on their vehicles, paying for vehicle maintenance, gas, and other job-related expenses out of their own pockets. They were classified by their employer as “contract” or “gig” workers and not employees.
The drivers contended that their work fell under full-time employee classification, and should not fall under independent contractor classification. The case moved through the courts and ultimately wound up at the California Supreme Court in San Francisco.
Ultimately, in an 82-page ruling, the seven justices decided that California workers can only be classified as independent contractors by a company if they can show that the worker meets the criteria set forth in the “ABC Test” listed above.
Who will this affect?
The Court's ruling could greatly impact any California employer that has used the “we're unique and the normal rules don't apply to us” as the reason for classifying any individual as independent contractor. This may not be a viable rationale anymore. According to Bryan Menegus at Gizmodo, “[The case] could have wide ramifications for Uber, Lyft, Amazon, Instacart, and other companies buoyed by the sweat of the gig economy.” What is yet to be seen is how this ruling may affect the entire gig economy business model.
More importantly, the ruling could greatly affect California employee rights and have a wide-ranging impact on all California contract employees. Why? Because it may require employers to provide benefits and a minimum wage for gig workers.
Bottom-line: it's important to stay tuned here as Lawyers for Employee and Consumer Rights continue to study and report on the changing landscape and court rulings concerning this important employment rights issue.
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