On April 30th, the Supreme Court of California issued an important decision on how to determine if a worker is an employee or an independent contractor.
In Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, the California Supreme Court held that it was appropriate to use the "ABC" test which already is used by a number of states, such as Massachusetts (see link to Order stored on Mega.nz).
Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that 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; (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 for the hiring entity.
Order at 7. Under this test, there is a presumption that the worker is an employee and to avoid this presumption, the employer must establish all three factors.
This change in law increases the risks to all employers that hire independent contractors, as California imposes substantial penalties on workers who are willfully mis-classified as independent contractors.