The California Supreme Court shook up the business world with their decision in Dynamex, a case covering the employer/worker relationship that we have discussed at length in this blog.
Until recently, the idea of an independent contractor existed in the California workplace. The test the courts used to determine if the worker was in fact an IC was, at its core, whether the employer had the right to direct the manner and means by which the worker performed the services. The court examined a number of established factors in hopes of answering that question.
As one might imagine, that test and its factors were open to interpretation and courts often came down with wildly different rulings on cases with similar fact patterns. In an attempt to make the line clearer, the California Supreme Court stepped in.
Adopting a very expansive definition of “employee”, the California Supreme Court stated that a worker is considered to be an independent contractor only if all three of the following factors are present:
1. The worker must be free from the control and direction of the payor in connection with the performance of the work, both under the contract and in fact;
2. The worker must perform work that is outside the usual course of the payor’s business; and
3. The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed by the worker for the payor.
In other words, not very often. Indeed, when applying this test, the Court held that truck drivers (long established to be independent contractors) were, in fact, employees of the company they worked for. This new test casts a wide net that will result in many “independent contractors” being reclassified as employees. It is important that you discuss the process of reclassification with legal counsel.
This decision will greatly affect California wage and hour litigation. The Court now imposes a burden on California businesses to defend their classification of workers as independent contractors. Misclassification of such workers can result in significant legal exposure with respect to wage and hour compliance.
To discuss next steps for your business, contact experienced employment attorney Drew Pomerance today.
