BLOG

What’s the difference between an employee and an independent contractor? The California Supreme Court addressed this question.

The Growing Gig Economy

“Gig” workers have become a crucial part of the U.S. economy and workforce. Numerous companies have workers that drive customers, deliver food and products to consumer’s homes and provide other “on-demand” services. For many Americans, “gig” jobs are becoming a primary source of income.

To date, most people who provide these services have been thought of as independent contractors. This led to the question – how do you differentiate an employee from a contract worker? That is important because the two are likely to have different compensation packages and benefit structures.

A Civil Suit Against Dynamex Operations West

A class action lawsuit known as Dynamex Operations West, Inc. v. Superior Court established a precedent for identifying an independent contractor. Similar suits have been brought forth by individuals who work on behalf of service providers such as Uber, but no distinction was previously finalized for workers in the sunshine state.

The California Supreme Court heard the case and issued a response on April 30, 2018. Their decision was unanimous. The court called for implementing something known as the “ABC Test.” This is a standard that is already used in Massachusetts and New Jersey.

About the ABC Test

The ABC Test creates 3 rules that can be used to define an independent contractor. They are:

A: 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: 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.”

Attorney Mark Pope was involved in the class action suit and subsequent case. He said the next step is to have another trial and settle all the claims that were brought against Dynamex. The ABC Test will be used to clarify whether or not people who worked on behalf of that company are deemed employees or contractors.

What California Employers Should Know

Pope believes that some California-based employers may be susceptible to class action suits based on the Dynamex decision. He suggested that employers consult their legal counsel and review the ABC Test so they can plan accordingly and reduce their risk of liability.

Every California employer should be aware of this new standard for classifying types of workers. It should be considered when businesses are determining if the people who work on their behalf will be identified as employees or contractors.

Staying Compliant

Methods of doing business change constantly. As they do, new laws are created to establish what employers can or cannot do during and after the hiring process. Keeping up with all these laws can be cumbersome.

At Backgrounds Online, we strive to stay up-to-date on laws that affect our customers so we can provide practical and educational resources that help keep them compliant wherever they operate. If you need assistance with your hiring process and compliance efforts, please contact us today. Our highly trained team is available to assist you Monday – Friday from 5am to 5pm PT.