Independent Contractors

On September 18, 2019, Governor Gavin Newsom signed into law AB-5, sweeping legislation that will affect the proper employment classification of over a million California workers who currently work as independent contractors. AB-5 codifies and expands the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018), which adopted the “ABC test” in holding that a company classifying an individual as an independent contractor bears the burden of justifying that individual’s independent contractor classification.

As previously reported, just over a year ago, the California Supreme Court issued a sweeping decision instituting a new test, called the “ABC test,” to determine whether a worker is properly classified as an independent contractor instead of an employee. On May 3, 2019, the California Department of Labor Standards Enforcement (DLSE), issued an opinion letter providing California employers with further insight on how the Labor Commissioner’s Office plans to apply the ABC test.

Last week, the California Supreme Court issued a sweeping decision adopting a new test that will make it much harder for companies to show that workers qualify as independent contractors instead of employees.  The ruling affects all companies in California that work with independent contractors, which includes freelance workers and outside consultants. The Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles may end up requiring companies that work with independent contractors to follow wage and hour laws that apply in the typical employer-employee relationship.