The pro-employee ruling will likely be hugely beneficial to workers in the “gig economy.”
The question of whether an employee is an independent contractor or an employee is a big one. Unlike employees, independent contractors are not entitled to benefits, or to any of the protections that are typically associated with working for a company. In recent years, many employers have classified more workers as independent contractors. This is particularly true in what is known as the “gig economy,” where people essentially work as freelancers for a company and are paid by the job or by the hour without receiving any benefits.
According to a California employment law attorney, this system heavily favored employers, who got the benefit of the labor — without the costs of paying for health insurance, workers’ compensation insurance, retirement and other benefits. However, a recent ruling from the California Supreme Court may change the ability of California employers to classify independent contractors as employees.
In Dynamex Operations West v. Superior Court, the California Supreme Court announced a narrow new test for determining whether a worker is properly classified as an independent contractor. Workers’ rights advocates are hailing the decision as pro-employee, and predicting that many independent contractors across the state will be reclassified as employees as a result of the decision.
In the decision, the Court discarded its previous multi-factor standard in favor of a simpler 3 prong test, which they deemed the “ABC test.” To be properly classified as an independent contractor, all three of the following factors must be met:
- The worker must be free, in everyday tasks, from the hirer’s control and direction;
- The work performed must be outside the usual course of the hiring entity’s business; AND
- The worker must be customarily engaged in an independent occupation or business of the same type as the work he or she is performing for the hiring entity.
The first factor is similar to the previous test’s “right to control” standard. Essentially, if the worker is free from the employer’s control in his or her daily tasks, he or she will be most likely be considered an independent contractor.
The second factor is VERY different from the previous test, and will be the part of the analysis that will likely cause many employers to re-classify their independent contractors as employees. While many businesses may be able to claim that they do not have control over their workers, they might have more difficulty claiming that the tasks performed by these workers are outside of their usual course of business. For example, Uber has successfully claimed in previous court cases that its drivers are independent contractors, as it does not exert sufficient control over them for them to be considered employees. However, it would be difficult for Uber to claim that its drivers are performing work that is outside of its usual course of business, given that Uber’s entire business model IS providing on-demand driving.
The third factor requires that the worker operate his or her own business, offering the same type of work to other entities. In the Uber example above, this factor could be met if drivers are also driving for Lyft or other car services. Issues that a court may consider include whether the employee has invested in a business, has other clients, and if he or she has their own employees.
If an employee has been misclassified as an independent contractor, it could have significant implications for his or her wages and benefits. An experienced California employment law attorney can advise you if you believe that a company has hired you as an independent contractor when you should have been classified as an employee. You may be entitled to wages and other benefits as a result of your misclassification.
At PLBH, we represent employees who have been treated unfairly by their employers. We fight to get justice for our clients, and to achieve the best possible outcome. Contact us today at (800) 435-7542 or info@plblaw.com to schedule an initial consultation or to learn more.