In April 2018, California’s Supreme Court finally brought clarity in the Dynamex decision to the question of how to determine when workers are independent contractors and when workers are actually employees misclassified as independent contractors.
What employers and workers believe, agree, or want the nature of the work relationship to be defined as does not matter. Employers cannot misclassify workers as independent contractors to gain competitive advantages or enjoy financial savings from obligations like payroll taxes or workers compensation insurance.
In order for a worker to be an independent contractor, the hiring person or entity must establish (A) that the hiring person or entity does not control or direct the worker’s performance of work, (B) that the worker performs work outside the usual course of the hiring person’s or entity’s business, and (C) that the worker customarily engages in an independently established business, occupation, or trade of the same nature as the work that the worker performs for the hiring person or entity. This is called the “ABC” test and if and if any one of the three requirements of A, B, or C fail, then a worker is classified as an employee because the worker does not pass the ABC test.