CA Supreme Court Issues New Employee Vs. Independent Contractor Test

May 9, 2018

On May 2, 2018, in Dynamex Operations v. Superior Court, the California Supreme Court adopted a new three-part test to determine if a worker should be classified as an employee or an independent contractor. The new “ABC Test” favors an employee classification, allowing an independent contractor classification only when the following three conditions apply:

• The worker is free (contractually and in fact) from the control and direction of the hirer in connection with the performance of work; and
• The worker performs work that is not within the normal course and scope of the hiring entity’s business; and
• The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Under the new rule, most workers will qualify as employees rather than independent contractors, entitling them to things like minimum wage, overtime and rest breaks, and requiring employers to withhold income taxes and pay various taxes on their behalf. The decision is a departure from the earlier California rule where the primary consideration was the degree of control the company exercised over a worker.

Please note that Cast & Crew does not pay independent contractors on behalf of clients. This notice is solely for the reference and benefit of clients who may pay independent contractors directly.

The full text of the decision can be read here.

If you have any questions, please email LaborCompliance@castandcrew.com

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The proceeding information is provided for informational purposes only, should not be construed as or relied upon as legal advice and is subject to change without notice. If you have questions concerning particular situations, specific payroll administration or labor relations issues, please contact your counsel.