The New ABC Test for California Independent Contractors – It’s A Serious Matter

On April 30, 2018, the California Supreme Court issued its ruling in Dynamex Operations West, Inc. v. Superior Court, setting a new standard for independent contractors – things are getting worse for employers in California! 

The Court stated that tougher standards must be used when it comes to classifying a worker as an independent contractor. This new standard is going to be very hard on employers because many workers currently classified as independent contractors will now be reclassified as employees.

In its ruling, the California Supreme Court stated that employers who want to classify workers as independent contractors must establishALL of the following:

A. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

What it means: This means that if an employer exercises the same kind of control over an independent contractor as they would over an employee, then the independent contractor will be classified as an employee. Examples would include, dictating how, when and where the independent contractor must perform the work.

B. The worker performs work that is outside the usual course of the hiring entity’s business; and

What it means: This means that the independent contractor can’t be in the same business as the employer. The best example of this would be a plumber who provides services to a manufacturing company (independent contractor) vs. a work-at-home product designer who designs the products manufactured by the company (employee).

C.The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

What it means: This means that the independent contractor must own and market his/her own business and provide services multiple customers, not just the hirer.

This is a significant ruling that will have a major impact on many California employers. Please take some time to reanalyze who you are classifying as an independent contractor at your place of business. Classifying employees as independent contractors can have serious consequences for your business. You will have to deal with the Internal Revenue Services, Employment Development Department, and the Franchise Tax Board just to name a few of your headaches — and they are not fun to deal with. It’s just not worth it!

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls.