On April 30, 2018, the California Supreme Court decided Dynamex Operations W. v. Superior Court– a case that dramatically limits who counts as a bonafide independent contractor under the law.
The old test for whether someone could be properly considered an independent contractor instead of an employee was a more flexible, multi-factor common law test where none of the individual factors, taken alone, were necessarily decisive. The new test, as set forth in Dynamex (“the ABC test”), provides three conditions, all of which must be met in order for independent contractor status to apply. The hiring entity has to show:
(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact
(B) that the worker performs work that is outside the usual course of the hiring entity’s business
(C) that the worker is customarily engaged in an independently established trade, occupation, or business.
The second condition, or the B prong in the ABC test, disqualifies many individuals from independent contractor status.
For instance, yoga instructors that work at a yoga studio do not perform work that is outside the usual course of the hiring entity’s business, because the hiring entity is in the business of offering yoga classes.
And massage therapists that work at a massage spa similarly do not perform work outside the usual course of the hiring entity’s business of providing massages to clients. As a result, yoga instructors and massage therapists generally must be converted from independent contractor status to employees, in order to comply with current California law.
In contrast, a plumber hired by a ski resort would be examples of a bonafide independent contractor because all three conditions of the ABC test are met. Plumbing is an independently established trade (condition C). Plumbers control the work they perform (condition A) and have specialized knowledge outside of the hiring entity’s usual course of business of providing facilities to ski (condition B).
If you need a consultation regarding how to properly classify members of your workforce or help with other labor and employment issues, I am available and can be reached at firstname.lastname@example.org.
Disclaimer: I am an attorney, but I am not your attorney and this article does not create an attorney-client relationship. I am licensed to practice law in California and have based the information presented on California laws. This article is legal information and should not be seen as legal advice. You should consult with an attorney before you rely on this information.
Interested to learn more, ask questions and attend an important upcoming seminar?
The team of Brooke Barnum-Roberts of Truckee Legal, and Kim Pierce of TruckeeHR are here to help. In partnership with the Truckee Chamber, they will be presenting a series of workshops to help small businesses understand some of the areas that often trip up small businesses.
The first in the series will address topics such as:
- Overtime, split shifts, on-call, reporting time pay, meal & rest times, timekeeping
- Paid sick leave, vacation pay, wages & paystubs, accommodations for leaves
- Exempt vs non-exempt, employee vs independent contractor
The format will be 60 minutes presentation, then 30 minutes Q&A. Workshop will be held February 27, from 2:30-4:00pm at the Truckee Chamber Administrative offices, 10183 Truckee Airport Road. Cost to attend is only $25 for Chamber members and $35 for non-members. Registration can be done online at truckee.com/hrworkshop