In April of this year, the California Supreme Court gave a ruling that made it more challenging for employers to classify employees as independent contractors. If you heard about this ruling, you also probably heard about its potential implications for big companies that revolve around independent contractors like Uber and Lyft. However, this law may impact you even if you are not affiliated with either of those companies. According to a study in 2016 by economists at Harvard and Princeton, an estimated 12.5 million people were considered independent contractors, making up 8.4% of the U.S. workforce. If you are one of those people living in California, or you employ one of them, you may want to review the changes to this law.
How could noncompliance affect you? If you wrongfully employ an independent contractor or multiple independent contractors, you could be sued under breach of California employment law for violating wage and hour guidelines among others. If you are the misclassified independent contractor and have the evidence and law on your side, however, the law is likely to favor you as a plaintiff in the case against your employer for breach of California employment law.
What should you know about California’s law change regarding independent contractors? This will serve as a guide to help determine if you are compliant or if you may have a case against an employer for misclassification.
Law is Easy as A, B, C
The new law is known as an ABC Test (Dynamex Operations W. v. Superior Court, 4 Cal. 5th 950 – 2018) with a three-pronged approach to determining if the individual can be classified as an independent contractor. There is a rebuttable presumption that a worker is an employee under this new test, meaning the presumption is that a worker should be classified as an employee unless the burden of proof is met by all three conditions.
This burden is met if a worker can show all of the following:
- (A) 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
- (B) Worker performs work that is outside the usual course of the hiring entity’s business; and
- (C) Worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
As you can see under these guidelines, companies like Uber and Lyft have a lot to be concerned about in that they essentially fail all three guidelines. However, you only need to fail one of these bullet points and there is cause for concern for the hiring party. This law is expected to impact industries from transportation to construction, and jobs across the board from sales consultants to nannies.
Why Did California Change This Law?
There are many reasons California decided to enact this law. In part, California was lacking the convenience and uniformity of a standard in terms of when a worker can and cannot be considered an independent contractor. This is especially problematic due to the rise of the gig economy, or the sudden prevalence of short-term contracts and freelance work as opposed to permanent jobs. The idea is to create a “worker-friendly” standard with this evolution of our economy and curtail abuse of the independent contractor system.
California Chief Justice Tani Cantil-Sakauye spoke on the ruling, saying that, “Individual workers generally possess less bargaining power than a hiring business and may face pressure to accept work for substandard pay and working conditions.” On another aspect of the ruling, she spoke on preventing businesses from avoiding industry-wide wage order and wage and hour protections that were, “intended for the benefit of those law-abiding businesses that comply with the obligations,” in order to avoid a, “race to the bottom.”
How Might This Law Change Affect Me?
If you employ independent contractors in California, you may want to ensure compliance with this law change in order to prevent a lawsuit for violating California employment law as soon as possible. Being proactive is the best step and, if you have questions, our attorneys are happy to help.
If you are the incorrectly classified independent contractor, you may be due certain protections and benefits under California employment law that you are not getting. As such, you may want to consider consulting with our attorneys to see if you are due compensation in a court of law from your employer. Because the law is very plaintiff-friendly, as long as you have documentation confirming violation of the law change, you have a good chance of success in your case with the right legal representation.
Are You Seeking an Attorney in an Employment Law Case?
Whether you are the plaintiff or defendant in a case involving California employment law, Webb Law Group can assist you. Our law firm has years of experience dealing with employment law matters including cases involving California independent contractor law. We are happy to review your case and advise you on how we can help and what to do next.
Webb Law Group is a reputable business law firm with experience in matters involving California Law, including handling employment litigation matters. Having a reputable attorney by your side for these matters will help give you the best possible chance of a positive outcome in your case. If you feel you need legal representation, we are happy to review your legal needs and provide consultation and support where necessary.
For questions, or to schedule a consultation, contact us today at (559) 431-4888 (Fresno) or (619) 399-7700 (San Diego).