A year ago, the California Supreme Court’s Dynamex ruling complicated the classification of workers as independent contractors. Employers are still trying to determine how the decision affects them, especially as the decision did not address whether it applied retroactively.
In April 2018, the California Supreme Court ordered courts to apply the strict “ABC test” to job misclassification claims, putting pressure on businesses to show that workers must provide services distinct from their core business in order to be classified as contractors. Typically, employees cost businesses more and have more protections than those of a contractor. As a result, classifying a worker as an independent contractor can be more appealing to businesses.
To prove a worker is an independent contractor under the ABC test, a company must show that the worker (1) is free from the company’s control, (2) performs work outside the company’s usual business, and (3) separate from their work for the company, is regularly working in the trade they have been hired to work.
As a result of this ruling, California employers have been left wondering whether they should reclassify independent contractors as employees. Additionally, the decision did not clarify whether it applied only to cases brought after the 2018 decision or whether it would also apply retroactively to claims as far back as four years. In late July, the Ninth Circuit issued an order stating that it would ask the California Supreme Court to determine whether the ABC test applies retroactively. Simultaneously, in the California legislature, Assembly Bill 5 is under consideration. That bill would codify the ABC test. Business are fighting to add many exemptions to the bill. The next few months will be pivotal in California as the courts and legislature could change the standard for worker classification.