Changes to Employee/Independent Contractor Law in California

Earlier this year, the California Supreme Court issued a decision that will affect whether California workers are classified as employees or independent contractors. The case, Dynamex v. Superior Court of Los Angeles County, states that in order to classify a worker as an independent contractor, the person or business who hires the worker must prove all three of the following things:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, and

(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 which is of the same nature as the work performed for the hiring entity.

Step (B) is the step that changes existing law the most. In the past, the mere fact that you were doing work that was related to the type of work that the company normally does would not alone determine whether you were an employee versus an independent contractor. Now, if you're doing work that is considered to be "within the usual course" of the hiring entity's business, you are likely an employee, not an independent contractor. The court decision explained what step (B) means using the following examples: 

  • When a retail store hires an outside plumber to repair a leak in a bathroom on its premises, or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store's usual course of business and the store would not reasonably be seen as having hired the plumber or electrician as an employee.
  • On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will then be sold by the company, or when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes, the workers are part of the hiring entity's usual business operation and the hiring business can reasonably be viewed as having hired them as employees.

It remains to be seen how the Dynamex case will play out in California. Many work situations fall in gray areas somewhere between the examples given by the court, and we will have to wait for lower court decisions to provide more guidance. Additionally, the California legislature could pass laws that change these rules, and federal labor laws will also add to the equation.

If you believe that your employment status, or that of people you hire, is unclear in light of this new court case, you should consult with a California attorney who practices in the area of labor and employment law for assistance. If you need help locating an attorney, the State Bar of California has certified Lawyer Referral Services to help Californians find attorneys, although the State Bar is not a lawyer referral service and cannot give any legal advice or direct you to a specific attorney.

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