It’s Not Really A Matter of Choice

State and federal laws provide detailed standards a business must closely examine for who it can rightfully classify as an independent contractor and who needs to be an employee. Yet, it is not uncommon for enterprises and those they hire to just skip all that and – with or without benefit of a written contract – structure their arrangement as an independent based on their arbitrary preferences. For example, a hiree may not want taxes withheld or a business may not want to attend to payroll record keeping or to pay employer-side taxes.

Pushed as a priority by state government, the incidence of claims alleging independent contractor misclassification appears to be growing. See, for example, Labor Commissioner’s Office Awards $3.5 Million Against Oakland Contractor (November, 2017).

The California Supreme Court is currently addressing the issue in Dynamex Operations West, Inc. v. Superior Court, a class action alleging an across-the-boards misclassification of delivery drivers as independent contractors. To prevail, the drivers are calling for a far broader definition of “employer” than contained in the Court’s last major decision on the topic, in 1989.

Under current laws, resolution of the classification question is not always simple or assured. The factors are numerous, including for instance whether workers will be subject to the company’s direction and control, are working only and indefinitely for that organization, and using that company’s tools and equipment. Due to the potentially astronomical cost of misclassifying workers as independent (including liabilities for underpayment of wages, deprivation of meal and rest periods, etc.), many attorneys have tended to give conservative, cautious advice on the topic, urging business clients in close cases to treat hirees as employees. See Independent or Employed? (April, 2014) and Independent Contractors and Employees (October, 2011).

We will keep you posted on the outcome of the Dynamex case. If the Court goes the drivers’ way, the ability to legitimately classify as independent those workers providing their regular or exclusive labors to a business may well be significantly diminished.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

February 23, 2018