California Supreme Court Changes Rules for Classifying Workers as Independent Contractors: Adoption of ABC Test

Posted on August 30, 2018

On April 30, 2018, the California Supreme Court changed the rules for classifying workers as independent contractors in approving the ABC test in place of the Borello test in claims involving regulating wages, hours and working conditions.

This Change May Affect You, If:

  • You are an independent contractor in the State of California.
  • You currently employ independent contractors in the State of California.
  • You own a business in California that may be wrongly classifying your employees.
  • You are an employee of a business in California that may be wrongly classifying its employees.

The Case

The ruling came about during Dynamex Operations West, Inc. v. Superior Court. To save money in 2004, Dynamex reclassified its delivery drivers as independent contractors. As a result of this, two workers sued the company for being labeled as independent contractors, rather than employees. While drivers were given a fair bit of leeway in scheduling, the Supreme Court classified the workers as employees based on parts B and C of the ABC test. The primary determining factor was the fact that delivery was a typical part of Dynamex’s business.

It is important to note that the old standard for testing, the Borello test, should still be used for wage and hour claims that are not wage order-based.

What is the ABC test?

Since the Supreme Court’s ruling, the ABC test is the new way of categorizing independent contractors in circumstances where regulation of wages is in question. To be categorized in this way, the worker must fulfill all three requirements, labeled as “a,” “b,” and “c”:

A: The worker is not controlled by the employer when it comes to work performance.

B: The worker is hired for a job that is outside the usual course of the employer’s business.

C: The worker is part of an established profession that is similar to the job being performed.

How does this test differ from the Borello test?

The Borello test was the previous standard for categorizing independent contractors’ claims relating to regulation of wages. While it is very similar to the ABC test, there are a few distinct differences. The Borello test examines employees based on 11, more detailed factors. The actual determination of whether or not someone is an independent contractor or an employee depends on a number of different factors that are not mutually exclusive. The most distinctive factors that do not apply to the ABC test are as follows:

  • Whether or not the worker and the employer believe they are creating an employer-employee relationship.
  • Payment method: per job or by time to do the job.
  • Length of the job and or degree of permanence of the working relationship.
  • The alleged investment in equipment or materials required by his or her task or any other financial risk taken by the worker.

What should I do if I suspect my employer is misclassifying me?

If you are an employee with a wage order-based claim, or you think you’re being misclassified as an independent contractor, please contact McNicholas & McNicholas, LLP for a free consultation at 310-474-1582. for a free consultation. Visit our website to learn more about your rights as an employee.

Sources:

https://www.jdsupra.com/legalnews/california-supreme-court-changes-rules-97989/

https://hrdailyadvisor.blr.com/2012/01/31/the-test-for-employee-vs-independent-contractor-in-california/

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