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California Workers vs. Independent Contractors

Orange County, California Employment Law Attorneys

 

–  On April 30, 2018, in its opinion in Dynamex Operations West, Inc. v. Superior Court, California Supreme Court clarified the standard for determining if a worker should be classified as an employee or an independent contractor.   The Supreme Court made it very clear that the burden of establishing that a worker is an independent contractor versus an employee falls on the hirer.  The hiring entities should also remember that the presumption is that a worker is an employee.  So, to show that a worker is an independent contractor, the hiring entity must overcome this presumption by  meeting each element of the ABC Test.  The ABC elements are as follows:
(A)            The worker is free from the control and direction of the hirer in relation to the performance of the work, both under the contract and in fact;
(B)            The worker performs work that is outside the usual course of the hirer’s business; and
(C)            The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hirer
If you can’t answer yes to all three elements of the ABC Test, then your worker must be classified as an employee and must receive a W-2 and not a 1099.
It should be noted that Dynamex and the ABC test apply to the wage-hour claims that arise under an IWC wage order.  Examples of IWC wage orders are claims for unpaid wages, minimum wages, meal-and-rest-period violations, wage-statement violations, etc.
The reason the Dynamex case is so important for California employers is because of the dire consequences that employers can face by misclassifying their employees as independent contractors.   Specifically, employers who misclassify their employees may face many wage and hour penalties for unpaid wages, unpaid overtime, and missed meal and rest breaks, in addition to the large civil penalties under Labor Code section 226.8, which is a fairly recent law which added penalties from $5,000 up to $25,000 for each violation.
California employers are highly encouraged to consult an employment lawyer to determine whether any or all such workers should be reclassified.  Mazarei Law Group, Inc., located in Irvine does offer a free initial consult to address such issues.

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