INDEPENDENT CONTRACTOR OR EMPLOYEE?

California Legislature Dealing with Competing Proposals to Kill or Expand  New Dynamex Test

In 2018, the California Supreme Court’s Dynamex ruling drastically changed the criteria for independent contractor classification to determine entitlement to many employee rights and benefits. See, Independent Contractor Status in California Now Falls Under Radically Different Rules (June, 2018).

Rejecting the long-established balancing test involving some 11 indicators of control vs. independence, Dynamex creates a three-factor “all or nothing” ABC test requiring the hiring entity to show that the claimed contractor:

(A) is free from the hirer’s control and direction in connection with the performance of the work;

(B) performs work that is outside the usual course of the hiring entity’s business; and

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

However, Dynamex does not apply across the boards. Its “ABC” test pertains only to alleged misclassification of contractors to avoid California Wage Order employee protections on minimum wage, overtime, and meal and rest breaks. The traditional “multi-factor” test still applies to all other alleged deprivation of employee rights by misclassification, including expense reimbursement, wrongful termination, and waiting time penalties. See, Independent Contractor Status? It Depends (November, 2018).

To resolve this split, the California Chamber of Commerce (Chamber) formed the anti-Dynamex “I’m Independent Coalition” to urge state lawmakers to restore the 11-point multi-factor test (see, e.g., Assembly Bill 71).

Conversely, Pro-Dynamex supporters are behind Assembly Bill 5, which aims to expand the Dynamex ruling to virtually all workplace situations while exempting limited professions from the ABC test including insurance brokers, risk managers, licensed physicians and surgeons, registered or licensed securities broker-dealers or investment advisors, and direct sales salespersons.

Stay tuned for the outcome of this hotly contested legislative issue.

For further assistance, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

April 19, 2019

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