This week the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court, which makes it more difficult for companies to classify workers as independent contractors. Under the Dynamex ruling, the Court adopted the “ABC” test in which a worker is presumed to be an employee of the hiring company unless the company can establish that:
- the worker is free from the company’s control or direction when performing the work,
- the work performed is outside the company’s usual course of business, and
- the worker is engaged in his or her own independent business or trade.
The burden is on the company to satisfy all three factors. If for example a company primarily operates as a delivery service, as Dynamex did, and it hires workers to deliver its goods, these workers will be considered employees. If on the other hand a department store hires a plumber to fix a leak, the plumber will not be considered an employee.
This ruling could have sweeping effects on how companies hire and classify workers. Company should take the appropriate steps to determine whether to treat its workers as employees or independent contractors. Otherwise they run the risk of facing lawsuits and stiff penalties.
Contact the experienced lawyers at Chauvel & Glatt to set up a time to discuss how to properly comply with this new law.