ABC. It's as easy as 123. Unless it's California's Independent Contract Test, that is.

First, I encourage everyone to sing the title of this article—at least the first part.[1]  And then, hold on if you currently utilize (or are) an independent contractor.  OnApr. 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. Superior Court, changing the test to determine whether a worker is an independent contractor or an employee.  Importantly, the ABC test puts the burden on the hiring entity to establish that the worker is an independent contractor, not an employee.  To meet its burden, the hiring must show:

 

(A) 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;

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 the work performed.

 

The hiring entity must satisfy all three prongs.  Failure to prove any of the three prerequisites will be sufficient to establish that the worker is an employee. 

Potentially troublesome is prong (B)—what is the “usual course” of the business?  Is Uber’s business creating a ride-sharing app, or giving rides?  Is housekeeping and janitorial work within the “usual course” of business for a real estate finance company?  Is a worker hired specially to decorate cakes part of a bakery business (on this one, the Court said “yes.”)  Unfortunately, there are many unanswered questions on this issue.  And the thirty years of court opinions regarding the old independent contractor test no longer provide direction.  Massachusetts law, the state from which the Court adopted the test, may offer some guidance—but it is not binding in California.

Despite the Court’s goal of creating “greater clarity and consistency,” in the short term, the new test will cause increased questions and litigation.  Any business or “hiring entity” utilizing “independent contractors” should evaluate—or consult an employment attorney—whether those workers are properly classified under California’s new test.



[1]           For reference, please see: https://www.youtube.com/watch?v=ho7796-au8U

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