By now, the California Dynamex decision (Dynamex Opertions West Inc. v. Superior Court) has been thoroughly discussed and analyzed in many publications and legal seminars. However, here is the big picture that both workers and especially employers should keep in mind, as it will help them understand what’s behind this significant ruling, and avoid liability and significant expenses associated with employee misclassification.
Through the Dynamex decision, California’s highest court sought to address common abuses of workers’ rights that became pretty much an epidemic in this new “gig” economy, where employers would classify workers as contractors under the guise of outsourcing or telecommuting. Companies would argue that since a worker is free to perform him duties from anywhere and at the time of his choosing, he should be classified as a contractor. The California Supreme Court, however, made it clear that a worker should be classified as an employee even if he has flexibility in work hours and work location, contrary to what many employers have gotten used to believing. The Court has articulate a new “ABC” test for determining whether a worker can be classified as a contractor that has been the law since. This three-factor test states that in order to be properly classified as a contractor, all of the following criteria has to be met:
(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; and