If you have independent contractors in California now is a good time to reevaluate whether they are truly an independent contractor or whether they should be classified as an employee. A recent decision, Dynamex Operations West, Inc. v. Superior Court has defined a new test for evaluating if an individual is an employee or an independent contractor under California’s Wage Orders (which impose obligations relating to minimum wage, overtime etc…). The test is the “ABC test” which assumes all workers are employees unless the business can demonstrate that the worker satisfies all three of the following conditions:
- The worker is free from the control and direction of the hiring entity (both under the contract for the performance of the work and in fact). i.e. Does the worker control the what, where and when of their work?
- The worker performs work outside the usual course of the hiring entity’s business. i.e. Are you hiring a seamstress for your clothing company? Then they are an employee. Hiring a plumber for your clothing company? They would pass this prong of the test. This will be where most of the litigation lies as it is not clear how the courts would interpret variations on this theme, for example, a VR programmer contracting for a company that specializes in social content but does not typically have VR offerings.
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed. i.e. Does the worker have their own business entity for the type of work they are performing for the hiring entity?
If any contractor does not satisfy all three of the above and they work in California, please reach out so we can discuss next steps. For a more thorough discussion of the Dynamex case click here.
This post was written by Rebecca Bernstein. If you would like to learn more about our Corporate & Business practice please contact Greg Mavronicolas at email@example.com or (646) 484-9569, or Rebecca Bernstein at firstname.lastname@example.org or (646) 770-2137.
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