Cal Supreme Court Deals Blow to the “Independent Contractor” Scam

May 3, 2018 by Andrew Baker

On April 30, the California Supreme Court issued a crushing blow to the “gig economy.” In Dynamex Operations West v. Lee, the Court imposed a standard that will make it much harder for Uber and similar employers to escape state employment standards by calling their workers “independent contractors” when there is little to nothing “independent” about their work.

In this case, the Court changed California law by adopting the “ABC” test for independent contractor status. Under the ABC test, a company that wants to classify workers as independent contractors has the burden of establishing each of the following:

(A)      the worker is free from control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; and

(B)       the worker performs work that is outside the usual course of the hiring entity’s business; and

(C)       the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.

Applying these three tests, the Court offered the following example:

 

[W]hen 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…. 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 thereafter 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….

 

In short, what the case holds is that employers are at risk for state law back pay and penalties when they seek to force their workers to bear the risk of on the job injury, deprive them of meal and rest breaks, and escape overtime obligations by pretending that they are “independent contractors.”

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