On April 30th 2018, the California Supreme Court formally issued their opinion of the highly anticipated case, Dynamex Operations West, Inc. v. Superior Court of Los Angeles County.
The purpose of this case is to determine the most appropriate classification of a worker by using (a) the employee criteria established in Martinez v. Combs (2010) or (b) the independent contractor criteria established in S.G. Borrello & Sons, Inc. v. Department of Industrial Relations (1989). Ultimately, the California Supreme Court redefined the criteria used to define whether a worker is an independent contractor by adopting the “ABC” test which has been established in other states such as Massachusetts and New Jersey.
The ABC test has three components which must all be met in order to classify an individual as an independent contractor:
- The worker is free from control and/or direction of the hiring entity.
- The worker’s contributions are not connected to the business’s performance.
- The worker typically works independently in other settings performing the same type of work to other businesses.
The new criteria established by the California Supreme Court has made it harder for businesses to classify their workers as independent contractors because workers are hired with the purpose of helping the business meet its performance objectives. For this reason, many California-based businesses, such as different types of ride-sharing services, may be affected because they will be forced to re-examine and re-classify the status of their employees in order to compensate their employees adequately. This precedent will also affect the amount of taxes businesses will have to pay if their workers are classified as employees.
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