Independent Contractor vs. Employee—The Proof is in the Classification, According to a California Supreme Court Ruling

A recent California Supreme Court ruling has changed the standard by which a worker is classified as an employee or an independent contractor based on the answers given to an "ABC" test.

The test, detailed in the ruling of Dynamex Operations West Inc. v. Superior Court of Los Angeles County (Lee), is now the standard in California. The questions are:

• A. Is the worker free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact?
• B. Does the worker perform work that is outside the usual course of the hiring entity's business?
• C. Is the worker customarily engaged in an independently established trade, occupation or business?
  

If the answer to any of these three questions is "No," the worker is to be classified as an employee, and the hiring business an employer. The employee classification provides the worker with protections of various labor laws, including minimum wages and meal and rest periods, family medical leave benefits and other protections of employment, including workers' compensation.

In the Dynamex case, The Court set out a presumption of employee status, placing the burden on the employer to prove an individual is an independent contractor as opposed to an employee.  "Although this ruling is a major victory for workers in California, many companies will be in no rush to properly classify their workers," says Richard Felton, a partner in the law firm of Gordon, Edelstein, Krepack, Grant, Felton & Goldstein, LLP (GEK).  

Although the Dynamex case did not arise out of an industrial injury case, the ABC test detailed by The Court  will likely be considered  in the future by the Workers' Compensation Appeals Board in disputes over employment status.

"It is important to note that independent contractors are not covered by workers' compensation," says Felton. "It is equally as important for workers to understand that whether an individual is an employee or an independent contractor is a legal determination, even if there is an agreement by the parties involved. A judge can find an employment relationship even if the parties had agreed the worker is an independent contractor.  A skilled attorney is able to successfully litigate such issues if there is a dispute regarding employment or independent contractor status."

Please call us at 213-739-7000 or click here to speak with a GEK attorney, as we have successfully litigated such cases.