New changes to the Labor Code (Section 2750.3 of California Labor Code) make it much tougher to classify workers as independent contractors in California.
The new law clarifies the standard for determining if workers should be classified as employees or independent contractors. It follows the “ABC Test” used by the California Supreme Court in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903.
Under the “ABC test”, a worker can only be classified as an independent contractor if:
(A) The worker is free from the control and direction of the hirer in connection with the performance of the work, practically and in the contractual agreement between the parties.
(B) The worker performs work that is outside the usual course of the hiring entity’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 hiring entity/company.
Under this stricter standard, it will be very difficult for companies to classify workers as independent contractors, meaning the workers will be classified instead as employees. Employees are entitled to protections such as minimum wage, workers’ compensation, unemployment insurance, paid sick and family leave, overtime pay and mandatory meal and rest breaks that do not apply to independent contractors.