New California authority controls classification of workers as employees versus independent contractors. Under the recent Dynamex decision, California workers will now be regarded as “employees” rather than “independent contractors” unless a three-part test is met by the company.
Dynamex Worker Classification Change:
Dynamex is a courier service that classified its drivers as employees up until 2004, when it reclassified its drivers as “independent contractors”. The drivers were required to complete all deliveries and routes in a given workday, but had the freedom to complete those tasks in whatever order they found best fit. Drivers were not given itemized wage statements, did not get reimbursed for work-related expenses, and did not receive overtime pay when assigned delivery schedules that required more than 8 hours to complete. The Dynamex drivers filed a class action over their “independent contractor” classification by the company.
Borello Test Replaced by ABC Test
The Dynamex case brought independent contractors to the attention of the California Supreme Court. The Court found the old “Borello Test” insufficient to determine if a worker is an employee or an independent contractor. It announced the new system California employers must use to determine proper classification of workers (as between contractor/employee) known as the ABC Test.
- worker was in fact free from control and direction on how work was performed; and
- work being done is outside of company’s usual course of business; and
- worker has a business doing that type of work.
So, for purposes of classification of workers, if the company cannot meet any of those three parts, the worker will be regarded as an employee.
Key takeaway: note element #2. This places the focus on what the business does and whether the job of the worker is inside or outside that “usual course of business.” This “course of business” prong changes the employment landscape in California and will likely result in far more workers being protected by California’s laws applicable to employees (e.g., overtime and breaks, not to mention many others).