In 2018, the California Supreme Court issued an opinion (Dynamex Operations West, Inc. v. Superior Court of Los Angeles County) establishing a new standard (“ABC test”) for determining whether an individual is an independent contractor or employee in the context of claims brought under the State’s Industrial Welfare Commission’s wage orders. The result is a broader definition of who qualifies as an employee for the purpose of a claim brought under a wage order.
Under the ABC test, a worker can be classified as an independent contractor only if all three of the following factors are met:
- That “the worker is free from control and direction” of the employer as it relates to performance of the work; and
- That the work is performed “outside the usual course of the hiring entity’s business”; and
- That the worker engages “in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”
However, the Court stated the new standard does not automatically apply to determine employment status under other statutes, and it may better effect the purpose of other statutes to utilize the long-standing test in S. G. Borello & Sons, Inc. v. Dept. of Industrial Relations.
Two assembly bills introduced on December 3, 2018, propose legislation related to the Dynamex decision.
California Assembly Bill 5 would add a new section to the Labor Code, proposed § 2750.3, to codify the test in Dynamex. It is unclear whether would broaden the Dynamex test beyond claims brought under the wage orders.
California Assembly Bill 71 would amend existing Labor Code §2750.5, which pertains to workers performing services for which a state contractor’s license is required, or performing services for a person who is required to obtain a state contractor’s license. This bill seeks to add a section ensuring that, in this setting, independent contractor status is determined under the Borello standard. Factors to be considered include:
- Whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired, which is the principal factor.
- Whether the one performing services is engaged in a distinct occupation or business.
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the services are to be performed.
- The method of payment, whether by the time or by the job.
- The right to discharge at will, without cause.
- Whether or not the work is part of the regular business of the principal.
- Whether or not the parties believe they are creating the relationship of employer-employee.
If you have questions about the independent contractor analysis, Jackson Lewis attorneys are ready to assist.