[News] California Supreme Court Adopts Stringent Test for Independent Contractor Status

Dynamex Operations West, Inc. v. Superior Court

On April 30, 2018, the California Supreme Court issued their much-anticipated decision in Dynamex Operations West, Inc. v. Superior Court, creating a significantly more stringent test for independent contractor (IC) status in California. In the unanimous decision, the Court adopted the “ABC” test for purposes of determining whether workers should be classified as employees or as independent contractors under California wage orders, which impose obligations on employers relating to minimum wage, overtime, meal and rest periods, hours of work, and other basic working conditions.

The Court held that one of the definitions of “employ” contained in the wage order—“to suffer or permit to work”—may be relied upon in evaluating whether a worker is an employee or independent contractor. In determining whether a worker is properly considered an independent contractor under this definition, the Court rejected the multi-factor test set forth in the seminal 1989 case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations. Instead, the Court adopted the Massachusetts version of the “ABC” test, recognized as among the most rigid employment status tests in the country.

California’s new ABC test presumptively considers all workers to be employees. In order to classify workers as ICs, the hiring party must demonstrate each of the following three conditions:

a) that the worker is free from the control and direction of the hirer in connection with the performance of the work and in fact; and

b) that the worker performs work that is outside the usual course of the hiring entity’s business; and

c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.*

*The wording of the ABC test varies somewhat across jurisdictions. Some versions permit a hiring party to satisfy part B of the test by establishing either that 1) the work provided is outside the usual course of the business for which the work is performed, or 2) the work performed is outside all places of business of the hiring entity. The Massachusetts, and now California, versions, however, permit the hiring party to satisfy part B only if it establishes that the work is outside its usual course of business.

For more information about this recent decision, contact us at information@rightsourcingusa.com.

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