The California Supreme Court issued a landmark decision on April 30, 2018 that will have major implications in determining whether a worker is legally considered an “employee” or an “independent contractor” in the Golden State. In Dynamex Operations, Inc. v. Superior Court of California, our state’s highest court unanimously adopted the “ABC” test for distinguishing employees from independent contractors. This new test broadens the definition of employees by focusing on the type of work the worker is performing for its employer and whether or not the worker is customarily engaged in that type of work. In turn, there is now a higher burden in order to establish that a worker is an independent contractor.
Under the new “ABC” test, to establish that a worker is an independent contractor, the employer must prove each of these three factors: (A) that the worker is free from control and direction of the hirer in connection with the performance of the work; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independent established trade, occupation, or business of the same nature as the work performed for the hiring entity.
Implications
The determination of whether a worker is an employee or independent contractor has major consequences in potential civil suits for damages stemming from someone’s wrongdoing. This expansion of the definition of an “employee” is good news for any individual who lives in our modern world of risks. Dangers exist right around the corner for many of our daily activities rather it be driving to work in the morning, walking across the street for lunch, cycling a trail on our beautiful NorthCoast, renting an Airbnb for a staycation, or hailing a ride-sharing app like Uber for a night out. Workers, such as delivery-couriers and Uber drivers, are now considered employees as a matter of law under this new ruling. As such, if you or a loved one is injured by the negligent act of, say an Uber driver, then Uber, the parent company of the driver, will likely be responsible and Uber’s insurance coverage should kick in.
In other words, if an employee injures a third party while acting under the scope of her employment, the business bears legal responsibility for the employee’s actions. However, independent contractors do not enjoy the legal indemnification or protection of their employer and are thus potentially personally liable for any torts they may cause. With this new “ABC” Test, it will now be far more difficult for the employer to prove that the worker is an independent contractor and tort victims will more likely be adequately compensated for their injuries
Workplace Protections
Moreover, there are many legal consequences and implications when businesses misclassify workers in California. Employees enjoy far greater workplace protection than independent contractors. For instance, employees are protected under the extensive set of federal and state law regulating the workplace, including wage, hour and discrimination laws. If a worker is deemed an employee, then the employer also bears the cost of paying federal social security & payroll tax, unemployment insurance taxes & state employment taxes, in addition to providing workers compensation insurance. Businesses should also be aware of the major financial penalties that exist when employees are wrongly classified as independent contractors.
Conclusion
If are you injured by someone else’s wrongdoing, it is imperative that you determine whether that person was acting under scope of his or her employment when the incident occurred. The Zwerdling Law Firm, LLP has over 50 years of combined experience answering these type of inquiries and we’re always happy to talk with you about a potential legal matter.