A hotly debated legal issue in California is how to determine whether a worker is an employee or an independent contractor. The answer to the question in any given situation determines what responsibilities the hiring entity has toward the worker regarding working conditions, hours, pay, termination, workers’ compensation and other perks, benefits and protections.
California is a state known for having strong, specific worker protections, so the correct classification of a worker as either an employee or independent contractor can have significant ramifications for both parties. However, it is more complicated than that because various protections and benefits are grounded in different state and federal laws and regulations.
This summer, we examined a new California Supreme Court case called Dynamex Operations West, Inc., v. Superior Court that adopted the “ABC test” for classifying a worker for purposes of state Wage Orders, which are Industrial Welfare Commission or IWC regulations imposing basic and broad wage-and-hour and worker-protection standards in the workplaces of various industries.
Under the ABC test, the law presumes that a worker is an employee unless the employer can show all three of the following:
- The hiring entity does not control or direct performance of the worker’s duties.
- The worker’s duties are of a different nature than those normally performed within the business.
- The worker has an independent business in which he or she performs the same type of work done for the hiring entity.
The Dynamex ABC test was a significant step away from the multifactor Borello test that emphasizes employer control and that has applied to the classification of California workers since 1989. Since Dynamex, other cases have examined the reach of the ABC test when it comes to its application to various disputes between workers and principals.
Garcia v. Border Transportation Group, LLC
Garcia is a recent California Court of Appeals case (certified for partial publication) involving a cab driver and his employment classification status with the company from which he leased a driving permit. Garcia sued Border alleging violations of eight different wage-and-hour and other employment laws.
In an important clarification, the appeals court emphasized that the ABC test applies to claims under IWC wage orders only and not to those brought under other laws, such as Labor Code section 2802 for reimbursement of expenses. For those other claims, the worker-classification test to apply is still the multiple-factor analysis of Borello.
Courts will continue to refine the California standards that define the employment relationship. Employers should maintain an ongoing relationship with an experienced employment lawyer to stay informed of important developments that impact its workplace responsibilities.