Now There’s Yet Another Reason To Be Sure Any Independent Contractors Working For You Are Properly Classified
Although it's only mid-January, the California Supreme Court has already issued an opinion on employment law that will likely be amongst its most influential of the year, confirming that the Dynamex “ABC” test for classifying workers applies retroactively. Pursuant to the Dynamex ABC test, a worker will generally be considered an employee and not an independent contractor unless the employer can prove (A) the worker was not under its direction and control during performance of work; (B) the worker’s business was not in the company’s usual course of business; and (C) the worker was engaged in an independent trade or business separate from the purported employer. The Dynamex ABC test broadens prior California law and changed the analysis for many workers who were previously considered independent contractors. Note, California Assembly Bill 5 codified the Dynamex ABC test into statutory law going forward.
One of the last open questions was how the test would be applied to cases with alleged violations of wage orders that predate the Dynamex ruling and AB 5. In its Vazquez v. Jan-Pro Franchising International, Inc., 2021 WL 127201 (Cal. Jan. 14, 2021) ruling, the California Supreme Court held that the Dynamex ABC test is the only test and does apply retroactively instead of the prior more narrow law. So what does this mean for employers? As always, each employer should regularly audit any workers that it classifies as independent contractors to determine if there is any liability. The more broad ABC test is here to stay, and that analysis should be used when considering whether to reclassify those already existing positions or alter job titles moving forward.