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California Supreme Court Made Huge Change to Independent Contractor Law

California employers will now face new challenges to classifying workers as independent contractors following the state Supreme Court’s decision in Dynamex Operations v. Superior Court. A new, more stringent test, referred to as “ABC,” will now be implemented.
Dynamex Operations was a package and delivery company that contracted with a variety of clients, including Amazon. Over 1800 drivers working for the company questioned the company’s classification of them as independent contractors and sued to force the company to accord them employee status.
For many years, California has classified workers by a multi-factor test that looked to a hiring entity’s “right to control” a worker’s manner of performing services as well as eight other considerations. The California Supreme Court has rejected that approach in favor of the more strict three-part “ABC” test. Under this test, the employer must show all of the following:

  1. That the worker is free from the hirer’s control and direction in connection with performing the work, both under contract and in fact;
  2. The worker performs work that is outside the usual course of the hirer’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.

This decision has been limited to Industrial Welfare Commission Wage Order #9, which sets forth the rules on minimum pay and basic working conditions for California’s transportation workers. The opinion is seemingly aligned with a similar test established in Massachusetts. The case will now return to the lower courts where the new standard will be applied.