For years, California and other states have gradually restricted employers’ ability to classify workers as independent contractors. California tends to frown upon classifying workers as independent contractors since independent contractors do not receive the same protections under labor laws as employees and, perhaps more importantly to the state, do not generate the same tax revenue as employees. For example, independent contractors do not get meal and rest breaks, they are generally not subject to wage and hour laws, and they are not protected under federal employment laws such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, or the Family Medical Leave Act, among others.
For the past 30 years, California has used the Borello standard when classifying independent contractors, which primarily relied upon whether the hiring company had the right to control the manner and means by which the worker performs the work. Additional factors considered under the Borello test included: the degree of skill required to perform the work, the method of payment, and whether the services being performed for the company are part of the company’s regular scope of business.
On April 30, 2018, the California Supreme Court issued its unanimous ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, changing the above rule, and making it even harder for employers to classify workers as independent contractors. The case was brought by drivers of a package and document delivery company, Dynamex Operations West, who alleged that the company misclassified them as independent contractors in order to avoid paying wages and benefits. After a lengthy opinion, the court adopted a new test for classification.
The New Test for Worker Classification
The new test adopted by California presumptively considers all workers to be employees and only considers workers to be properly classified as independent contractors if all three of the following prongs of the test are satisfied:
- 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; and
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- 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.
As an example, the court stated that a plumber hired by a retail store to repair a bathroom leak would not be performing work that is part of the store’s usual business and would therefore be considered an independent contractor of that store. However, seamstresses sewing at home using materials provided by a clothing manufacturer would probably be considered employees of the manufacturer.
This latest ruling is yet another stern reminder to California businesses that they must take care in classifying their workers. If you need assistance in properly classifying workers, the attorneys at Navigato & Battin are here to offer help. In particular, if you have independent contractors who perform tasks for your business on a regular basis or which fall within the scope of your primary business focus, it is essential to have an experienced attorney review the relationship to ensure that you are properly classifying the individual.