The California Supreme Court has completely re-written the law regarding who can be defined as an independent contractor in a decision that one attorney says is a “contractor apocalypse.”
The court threw out a more flexible standard in place since 1989, replacing it with what is called the three-pronged “ABC Test.”
Similar ABC Tests are in use in other states like Massachusetts, Connecticut, Illinois and New Jersey, but the new California standard is much stricter than any other state’s.
Under the new criteria, a worker is considered an employee instead of a contractor unless the worker:
(A) 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.
(B) Performs work that is outside the usual course of the hiring entity’s business. (Other states specify outside of the employer’s physical location.)
(C) Is customarily engaged in an independently established trade, occupation or business.
The California court ruling involved package delivery drivers for Dynamex Inc, which makes extensive use of independent contractor drivers.
Dynamex delivery drivers work on-demand using their own vehicles, set their own schedules, remain free to accept or reject an assigned delivery and receive pay based on a flat fee or a percentage of the delivery fee.
Attorney Erin Norris Bass of the Steptoe & Johnson law firm sees the new test creating a wave of wage-hour class actions, not just for Uber and Lyft, but for other firms that traditionally use independent contractors, like trucking companies.