Radically New Dynamex Test Only Applies to Certain Employee Classification Cases

This past spring, the California Supreme Court inexplicably tossed out its decades-old “multi-factor” independent contractor test in favor of a far more stringent three-part “ABC” test. (Dynamex Operations West, Inc. v. Superior Court).  See, Independent Contractor Status in California Now Falls Under Radically Different Rules (June, 2018).

Under the new test, a worker is automatically presumed to be an employee unless the hiring company can prove each part of the ABC test:

1. The worker is free from the hirer’s control and direction in connection with the performance of the work, both under the contract and in fact;
2. The worker performs work outside the usual course of the hiring entity’s business; and
3. 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.

In Garcia v. Border Transportation Group, a California appellate court recently confirmed the ABC test only applies to alleged California Wage Order violations (e.g., minimum wage and overtime issues) and that the traditional “multi-factor” test will continue to apply to all other order claims such as expense reimbursement, wrongful termination, and waiting time penalties.*

The California Chamber of Commerce (Chamber) has spearheaded the “I’m Independent Coalition” to urge state lawmakers to enact more reasonable legislation against the Dynamex ruling. The Chamber also commissioned Beacon Economics, LLC  to report on Dynamex’s financial impact in California.

Until the legislature decides to act, businesses who regularly utilize independent contractors should, together with knowledgeable legal counsel, carefully evaluate those working relationships. For example, affirmative answers to any of the following questions might require reclassifying a worker as an employee:

Part A:

• Have the parties neglected to put their agreement in writing?
• Does the hiring company control or have the right to control the work its contractor performs?
• Does the contractor work out of the hiring company’s business premises?
• Does the hiring company require the contractor to follow the same company procedures and manuals as its employees?

Part B:

• Is the work performed by the contractor similar, identical or fundamental to the hiring entity’s core business?
• Does the contractor provide services in a role comparable to that of an employee?
• Is the contractor ordinarily viewed by others as working for the hiring company?
• Does the hiring company have employees who perform substantially similar work as its contractors?
• Does the company require its contractors to wear company uniforms or logos?

Part C:

• Does the contractor work exclusively for the hiring company?
• Has the contractor failed to create separate and distinct business cards or obtain a business telephone number, website address, and/or marketing and promotional materials?
• Has the contractor omitted to advertise its services to the general public?
• Is the contractor not currently established in an independent business?

*Note: The Garcia court also held that part C requires an existing, not potential, showing of independent business operation.

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

Cindy Bamforth

November 9, 2018