Yesterday, the California Supreme Court announced an extremely narrow, anti-business test for determining whether a worker is properly classified as an independent contractor. The new standard, set forth in Dynamex Operations West, Inc. v. Superior Court, is so stringent that workers rights’ advocates are predicting a sweeping re-classification of workers throughout the state. Though the decision’s impact will most immediately be felt within the gig economy, every California business that relies, in whole or part, on classifying workers as independent contractors rather than employees, should re-visit its approach.
The decision abandons the previous multi-factor standard that has been in place since 1989 in favor of a simple, three-prong test, termed the “ABC test.” To be properly classified as an independent contractor, all three of the following factors must be met:
(1) The worker must be free, in everyday tasks, from the hirer’s control and direction;
(2) The work performed must be outside the usual course of the hiring entity’s business; and
(3) The worker must be customarily engaged in an independent occupation or business of the same type as the work he or she is performing for the hiring entity.
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