Am I an Employee or Independent Contractor?

The Supreme court recently announced its decision in Dynamex Operations West, Inc. v. Superior Court case that defines the classification of employees vs. independent contractors’ status more clearly. Specifically, the court issued a three-part test which is called “ABC” test:

1. That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
2. That the worker performs work that is outside the usual course of the hiring entity’s business; and
3. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

An employer bears the burden of proving all three factors above before classifying an employee as independent contractor. If the employer cannot proof at least one factor, a person is presumed to be an employee. This test certainly makes it easier to determine the status of many California workers. However, it is still not as black and white as we wish. For example, if an employer controls and directs employee’s work, hours, and performance, the first prong of the ABC test is met. Further, if a worker performs duties for an employer on a full-time basis and is not engaged in an independently established trade, occupation, or business, the C prong of the ABC test is also met. Now imagine that a worker is performing maintenance/handyman work for a nail salon. Presumably, the second prong cannot be met because the worker performs work that is outside the usual course of a nail salon that provides such services as manicure, pedicure, massage, etc. However, it does not mean automatically that such a worker should be classified as an independent contractor. In cases like this, the court will further look at the nature of the work relationship as a whole and only then determine the proper classification.

It is more lucrative and beneficial for an employer to classify a worker as independent contractor because in this case an employer among other things does not have to pay certain payroll taxes, does not have to pay a worker an overtime compensation, does not have to provide a worker with meal and rest breaks, and does not have to provide a worker’s compensation insurance. In a word, classifying a worker as independent contractor saves your employer tons of money!

If you suspect your employer misclassified your status as independent contractor, feel free to call or email us for a free initial consultation.