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New Test for Independent Contractor Status

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California Supreme Court Adopts New Test for Independent Contractor Status

By Cynthia Hackler Flynn, Hackler Flynn & Associates

On April 30, 2018 the California Supreme Court issued an opinion that makes California one of the least hospitable jurisdictions in the nation for utilization of independent contractors. As a result, many companies that were in compliance with the labor laws in California related to independent contractors yesterday may be out of compliance today.
The ruling came in a case originally filed in Los Angeles County Superior Court by a worker named Charles Lee. Lee claimed that Dynamex Inc. improperly classified him as an independent contractor. The case drew attention from the media and legal minds alike because it involved the hot-button issue of independent contractor versus employee. The distinction being that an employee is subject to wage and hour laws and entitled to benefits such as workers’ compensation.
Until yesterday, the general test for determining whether a worker could be properly classified as an independent contractor involved a number of factors which focused primarily on the degree of control that the company had over workers, but no one factor was determinative of independent contractor status.
In its 82-page decision, the California Supreme Court rejected the continued use of its well settled multi-factor test in favor of a more rigid “ABC” test. The new test presumptively considers all workers to be employees, and permits the classification of a worker as an independent contractor only if the hiring business satisfies the following conditions:
  • (a) That 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 the work and in fact;
  • (b) That the worker performs work that is outside the usual course of the hiring entity’s business; and
  • (c) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Businesses operating in California will need to reevaluate their use of workers classified as independent contractors and, if needed, quickly restructure the business and relationships to comply with this decision.
Feel free to contact Cindy Flynn with questions at cindy@hacklerflynnlaw.com.
–by Cynthia Flynn, Esq.
Cythia Hackler Flynn founded and owns Hackler Flynn & Associates, a law firm in Southern California that represents a diverse group of businesses and individuals. Hackler Flynn & Associates facilitates close relationships with clients and provides quick, meaningful legal advice. The goal at Hackler Flynn & Associates is to help you thrive in business with the confidence of knowing that your legal team is looking out for you.  Their seven attorneys are always ready to take your calls and believe in personal attention to clients’ needs. Learn more about Hackler Flynn & Associates at www.hacklerflynnlaw.com

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