The sharing economy has led to an increasing number of independent contractors. But what is an independent contractor? A recent decision by the California Supreme Court (Dynamex Operations West, Inc. v. Superior Court of Los Angeles, No. S222732 Cal. Sup. Ct. Apr. 30, 2018) has adopted a modified “ABC” test in a case involving this question. The court was asked to determine what test should apply in determining what “employ” and “employer” means under the California Industrial Welfare Commission wage orders (note this important limitation). The court declined to apply the Borello test in favor of a more rigid 3 factor approach known as the “ABC” test.
Under the new stricter test, a person will only be considered an independent contractor if the hiring entity can prove all three of the following:
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; and
C. that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
The court declined to apply the test to other wage and hour laws. For corporate lawyers, Dynamex is a reminder that the definition of an independent contractor is ever changing.