California Supreme Court Decision on Independent Contractors

In a decision that could have significant implications for gig workers in the Sunshine State, the California Supreme Court has held that a new legal test must be used to determine whether California workers are employees or independent contractors. The ruling clarifies the legal standard for distinguishing between employees and independent contractors. (Dynamex v. Superior Court) There are existing state regulations that outline minimum wage and overtime rates for nonexempt employees. Presently, these rules don't apply to workers classified as independent contractors.

The California Supreme Court's decision adopts a three-factor test – the ABC test – which presumes workers are employees unless a business can prove they meet the criteria under all three qualifications that classify them as independent contractors. Since 1989, the state's courts have relied on the more flexible worker classification standard of the common law right-to-control test. Under the ABC test, a worker qualifies as an employee only if:

(A) the worker is free from the control and direction of the hiring firm when performing the work

(B) the worker performs work outside the usual course of the hiring firm's business, and    

(C) the worker has an independently established trade, occupation or business. (Dynamex v. Superior Court)