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The California Supreme Court Restricts Use of Independent Contractors

The California Supreme Court in its recent ruling in the Dynamex v. Superior Court of Los Angeles [4 Cal.5th 903] case has made it even more difficult to classify workers as independent contractors. Dynamex was a class action brought by delivery drivers against a delivery company (Dynamex), who claimed they were misclassified as independent contractors despite having signed independent contractor agreements with the company, resulting in wage and hour violations and engagement in unfair and unlawful business practices by the company. The California Supreme Court ultimately ruled in favor of the drivers by determining that they were employees and not independent contractors.

Following Dynamex, all workers are now assumed to be employees for California wage order matters, unless the employer can prove that a worker is an independent contractor. All of the following must be met to show a worker is an independent contractor rather than an employee: (A) 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; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the work is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

This significant decision in the Dynamex case assumes that all workers are employees. To mitigate the risk of misclassification of workers and the penalties associated with such misclassification, which include but are not limited to civil penalties assessed by the State of California of $5,000-$25,000 per violation, IRS penalties, payment of unpaid wages, and possible criminal penalties, businesses should consult with a qualified attorney. Vogt, Resnick & Sherak, LLP has extensive experience with these matters. Please contact us if you need help determining whether a worker is properly classified as an employee or independent contractor.