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Am I an independent contractor or an employee under California law?

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Employee vs Independent Contractor - California Law and the ABC test: you've probably been misclassified and you're owed significant unpaid wages

Whether you're an employer or an independent contractor can be HUGELY important to you. The recent Dynamex case and the ABC test means that you've probably been misclassified.  Meaning, under California wage and hour law you should be classified as an employee, instead of as an independent contractor. 

If this is the case, you may be owed a lot of money in unpaid wages and penalties. In this article I explain California law on misclassification, independent contractor vs. employee, the Dynamex ABC test and much, much more. 

This is the most comprehensive webpage on these issues. Period. 

California workers that are misclassfied as independent contractors - when they’re really employees can bring a wage and hour lawsuit against the employer. You can often recover very significant money damages, including:
 
- Unpaid wages
- Unpaid overtime
- Unpaid meal and rest breaks
- Paycheck stub violations
- Waiting time penalties
 
This article discusses independent contractor misclassification lawsuits under California law.
 

What is the difference between an employee and an independent contractor under California wage and hour law?

 
Let’s take a quick look at the ABC test. Under the ABC test (from the recent Dynamex California Supreme Court case), you are considered to ba an employee and the person or company that hires you, has the burden of proving that you are an independent contractor, rather than an employee.
 
California Wage Orders require  a hiring entity asserting independent contractor status to establish each of the three factors of the ABC test and show:
 
- that a worker is free from its control,
- the worker is performing work outside the usual course of its business, and
- the workers is customarily engaged in independent work.
 
Under the Borello multifactor test , the key element is control. Generally, if the person receiving the services exercises primary control over how the task is performed--instead of just naming the desired result--then there is an employee-employer relationship.
 
I discuss these in much more depth in this article.
 

What if I signed an agreement or contract saying that I’m an independent contractor?

 
Oftentimes companies will make workers sign agreements that say the worker is an independent contractor and not an employee. Under both the ABC test and the Borello multifactor test, the fact that you signed such an agreement will not prevent the law from finding that you’re an employee.
 

What should I do if I’m classified as an independent contractor when I should be an employee?

 
You need to take action in order to enforce you’re rights.  I suggest that you try to hire the best, honest wage and hour lawyer that will agree to take your case. Your should not wait. 
 
 
If  you need help right now you can call us 619-234-2833 or 
Contact us on this webpage. 


What wages am I entitled to if I am wrongly classified as an independent contractor when I should be an employee?

 
When you’re misclassified as an independent contractor when you’re an employee, you can oftentimes receive significant compensation, including:
- Unpaid wages
Unpaid overtime
- An hour's wage for every missed meal break
- An hour's wage for every missed rest break
- Paycheck stub violations
- Waiting time penalties


How long do I have to bring a claim or a lawsuit for wages if I’m misclassified as an independent contractor?

 
Generally, for most wage claims you have three years in order to bring a claim.  This can oftentimes be extended to four years for an unfair competition claim.
 
You have one year to bring PAGA case for paycheck violations. 
 
However, you should not wait, You should take action today in order to protect your rights.

A No B.S. straight-shooter lawyer

Believe it or not, Bill is known for being a no B.S. straight-up lawyer. Besides being known as one of the leading experts on this area of the law in California, one of the reasons why Bill is asked to testify at legislature hearings is because he is known for being straight-forward and blunt. He is known for being no B.S., with no lawyer-talk, no double-talk. 

When you read this article, it should become apparent to you that I'm not you're usual lawyer. Bill doesn't mind telling you when the law is wrong, when Judges interpret the law wrong and/or when the law is an ass.  That is, when the law is wrong.  This candor or willingness to be truthful when most lawyers are afraid to do so -  is why Bill Turley is asked to both help draft the law and asked to testify before the California State Senate and California State Assembly.  California legislator's know he is going to be painfully honest with them.  It's why Bill is known as "The Lawyer of Harsh Reality."  When workers are getting screwed - he's not afraid of telling folks. Loudly. 

Bill Turley is the go-to lawyer that is chosen to testify before the California legislature

on wage and hour law

California law: independent contractor vs. employee - the Dynamex ABC test by California's leading missclssification lawyer - Bill Turley


Employee vs Independent Contractor - why this is so important to you (read: lot's of MONEY) 

 
As the California Supreme Court observed in the Dynamex case, under both California and federal law, the question of whether an individual worker should properly be classified as an employee or, instead, as an independent contractor has considerable significance for workers, businesses, and the public generally.
 
On the one hand, if you (read: the worker) should properly be classified as an employee, the hiring business (read: your employer) bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing you workers' compensation insurance, and, complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees.
 
For example, as a non-exempt (hourly) employee you are entitled to meal breaks, rest breaks, being paid for all hour worked, minimum wage and probably overtime. What you are going to see is that these wages can add up to thousand and even ten’s of thousands of dollars for you and your family.
 
As an employee, you (read: the worker) then obtain the protection of the applicable labor laws and regulations.
 
On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities,  the worker obtains none of the numerous labor law benefits, and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 912-913, (2018).
 
Stated perhaps more simply. If you are an employee, the law protects you in a number of ways. California has the strongest worker protection laws in the United States.
 
In order to be protected by these laws you must be an employee. If you are an independent contractor - you don’t have the protection of any of these powerful laws.
So what you will see is that time and again, companies will try and skirt these strong worker protection laws by concocting schemes to make workers independent contractors rather than employees.
 

The Borello case

 
In Borello the California Supreme Court addressed whether concerned whether farm workers hired by a grower to harvest cucumbers under a written “sharefarmer” agreement were independent contractors or employees for purposes of the California workers' compensation statutes. S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 345 (1989).
 
The grower in Borello contended that the farm workers were independent contractors under the control of details test because the workers:
 
(1) were free to manage their own labor (the grower did not supervise the picking at all but compensated the workers based on the amount of cucumbers that they harvested),
(2) shared the profit or loss from the crop, and
(3) agreed in writing that they were not employees.
 
In rejecting the grower's contentions, the California Supreme court in Borello summarized its conclusion as follows:
 
 “The grower controls the agricultural operations on its premises from planting to sale of the crops. It simply chooses to accomplish one integrated step in the production of one such crop by means of worker incentives rather than direct supervision. It thereby retains all necessary control over a job which can be done only one way. Moreover, the harvesters' work, though seasonal by nature, follows the usual line of an employee. In no practical sense are the ‘sharefarmers’ entrepreneurs, operating independent businesses for their own accounts; they and their families are obvious members of the broad class to which workers' compensation protection is intended to apply.” S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 345 (1989).
 
On this basis, the California Supreme court concluded the workers were employees entitled to workers' compensation as a matter of law. S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 346 (1989).
 

The multi-factor test

 
The California Supreme Court in Borello enumerated a multi-factor test for determining whether a worker is an employee or an independent contractor. I call this multi-factor test a  Rorschach test. It is a completely asinine way to determine whether a worker is an employee or an independent contractor. Unless, of course,  you are a company that is trying to evade the expense of having employees.
 
At the end of day, your lawyer will be standing in front of a jury (or Judge) and trying to convince them that you are an employee. The company will be trying to convince the jury that you’re an independent contractor. 
 
With a trial you will have jury instructions. I know I am getting a tad deeper in the field than many you may care to plow, but I think this is important in understanding exactly how jacked up the Borello decision has been interpreted by the courts.
 
Keep in mind at all times that the California Supreme Court found as a matter of law that the workers were employees in the Borello case. None of that matters when you bring your case, at least it didn’t matter before the Dynamex case, because as I will explain, the Dynamex court brought things back to where they need to be - namely with an understanding that this is all about protecting workers - not protecting companies trying to screw workers, but I regress.
 

Borello, jury instructions, confusion and employers gaming the system and hosing employees like you

 
Under Borello (which again was a workers’ compensation case) the factors the jury was to weigh in order to determine whether a worker is an employee or an independent contractor - - has been called the multifactor test. The control of details was supposed to be the main factor. But, it would usually get lost in the other five factors.
 
In addition to the control of details factor, the other five factors included in the six-factor test are:

 (1)  the alleged employee's opportunity for profit or loss depending on his managerial skill;
 (2)  the alleged employee's investment in equipment or materials required for his task, or his employment of helpers;
 (3)  whether the service rendered requires a special skill;
 (4)  the degree of permanence of the working relationship; and
 (5)  whether the service rendered is an integral part of the alleged employer's business.”
 S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 354-355 (1989); CACI 3704.
 
The result of Borello and CACI 3704 was a whole lot of employers thinking they could and would game the system. That is, classify workers that should be employees as independent contractors and depend on the uncertainty of CACI 3704 to save the day in the end. 
 
Here is some of the actual language from CACI 3704:
 
 In deciding whether [name of defendant] was [name of agent]’s employer,
 in addition to the right of control, you must consider the full nature of
 their relationship. You should take into account the following additional
 factors, which, if true, may show that [name of defendant] was the
 employer of [name of agent]. No one factor is necessarily decisive. Do
 not simply count the number of applicable factors and use the larger
 number to make your decision. It is for you to determine the weight
 and importance to give to each of these additional factors based on all
 of the evidence.
 
This has to be the most poorly worded jury instruction in CACI ever.  You might as well tell the jury “do whatever you like. It’s all up to you. Which lawyer did you like better?  You should do what they told you to do.”  Which is why I have always called it a  Rorschach test.
 
A Rorschach test is a set of symmetrical ink blots of different shapes and colors is presented one by one to the subject, who is asked to describe what they suggest or resemble.
 
Which is pretty close to the Borello/ CACI 3704 multifactor test.
 
According to the online Urban Dictionary, the definition of hosed is: 
 
"Hosed": 

1. Messed up completely and without hope; to be in a hopelessly bad condition or position.
2. To spray with water from a hose.
3. Swindled or taken advantage of by deception.
4. To be waylaid and prevented from accomplishing something.
 
 
Most courts in California are going to follow the jury instructions as laid out in CACI -  Judicial Council of California Civil Jury Instructions (CACI). Not to say that I blame them, I understand why Courts follow CACI, I just sometimes disagree with the CACI instructions themselves.  Meaning, how they are written.  Here is one of those instances. And especially after the Dynamex decision. 
 
 
The company might be tagged as the employer under CACI 3704, but it was well worth it to try and game the system.  Every trial lawyer knows that when a jury is confused, the Defendant wins. Nothing is more confusing than CACI 3704. So, what happened was company after company started to game the system by calling workers “independent contractors.” 
 

In other words, workers were being hosed by the law. 
 
 
Don’t think it was just Dynamex.  Think Uber, Lyft, clothing manufacturing companies, strip clubs, cake decorators, medical groups, law firms, trucking companies like Dynamex, and the list goes on and on.by saying 
 

The California Supreme Court agreed that workers were getting hosed by the Borello multifactor test / CACI 3704 "the Borello multifactor test invites companies to evade their liability"


The California Supreme Court in the Dynamex case said basically the same thing about the Borello multifactor test:

 “[T]he use of a multifactor, all the circumstances standard affords a hiring business greater opportunity to evade its fundamental responsibilities under a wage and hour law by dividing its work force into disparate categories and varying the working conditions of individual workers within such categories with an eye to the many circumstances that may be relevant under the multifactor standard...[“[t]he legal test for determining employee/independent contractor status is a complex and manipulable multifactor test which invites employers to structure their relationships with employees in whatever manner best evades liability.”
 Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 955, (2018). (citations omitted).
 
Now you can see why the employer in Dynamex urged the California Supreme Court to use the Borello multifactor test in determining whether workers should be classified as either employees or independent contractors for purposes of interpreting  the California wage orders.
 
The Supreme Court in Dynamex, instead, held the proper test of establishing whether a worker is an employee or an independent contractor under the California Wage Orders is the “ABC” test
 

Martinez: “to employ” under the wage orders definition, has three alternative definitions

 
The California Supreme Court in Dynamex addressed the issue of “employ” and “employer” set forth in the California wage Orders in the Martinez case. Although Martinez did not directly involve the issue of whether the workers in question were employees or independent contractors, it did address the meaning of the terms “employ” and “employer” as used in California wage orders. Martinez v. Combs, 49 Cal. 4th 35, 36 (2010).
 
The California Supreme Court in the Dynamex case observed that the proper scope of the Martinez decision lies at the heart of the issue in the Dynamex case. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 935-936, (2018).
 

Martinez was a joint employer case

 
In Martinez, the strawberry grower Munoz & Sons (Munoz) directly employed seasonal agricultural workers but failed to pay the workers the required minimum or overtime wages they had earned.  Martinez v. Combs, 49 Cal. 4th 35, 36 (2010).
 
The workers filed an action under Labor Code Section 1194 seeking to recover such wages not only from Munoz, but also from several produce merchants to whom Munoz regularly sold its strawberries. It is important to note that the central issue in Martinez is whether produce merchants were joint employers of the farm workers.
 
The Martinez workers contended that in an action for unpaid minimum or overtime wages under section 1194, the alternative definitions of “employ” and “employer” set forth in the applicable Industrial Welfare Commission wage order—there, Industrial Welfare Commission wage order No. 14—constituted the applicable standards for determining who was a potentially liable employer. They further contended that under the wage order definitions, the produce merchants, as well as Munoz, each should properly be considered the workers' employer who was jointly liable for the workers' unpaid wages.
 
The Martinez court held as follows:
 
 “To employ, then, under the IWC's definition, has three alternative definitions. It means:

  (a)  to exercise control over the wages, hours or working conditions, or
  (b)  to suffer or permit to work, or
  (c)  to engage, thereby creating a common law employment relationship.”
  Martinez v. Combs, 49 Cal. 4th 35, 64 (2010). (Emphsis added). 
 
The California Supreme court in Martinez then went on to determine whether, under the wage order's alternative definitions, the produce merchants in that case should properly be considered the employer of the agricultural workers and thus could be held liable for the workers' unpaid minimum or overtime wages. Martinez v. Combs, 49 Cal. 4th 35, 68-77 (2010).  With respect to each of the produce merchants, the court in Martinez ultimately concluded that the merchants could not properly be found to be an employer under any of the wage order's alternative definitions.
 
The California Supreme Court in the Dynamex case cited the following passage from Martinez:
 
 “A proprietor who knows that persons are working in his or her business without having  been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so.”  Martinez v. Combs, 49 Cal. 4th 35, 69 (2010); Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 939, (2018).
 
Nonetheless, the Martinez court rejected the workers' contention that because the merchants knew the agricultural workers were working for Munoz and because their work benefited the produce merchants, the merchants suffered or permitted the workers to work within the meaning of the wage order. The court explained that the fact the merchants may have benefited from the workers' labor, “in the sense that any purchaser of commodities benefits,” was not sufficient to incur liability for having suffered or permitted them to work. Martinez v. Combs, 49 Cal. 4th 35, 69 (2010).
 
The workers' claim in Martinez failed because they were not working in the produce merchants' businesses and the merchants lacked the power or authority to prevent the workers from working for Munoz. Martinez v. Combs, 49 Cal. 4th 35, 70 (2010). 
 
In sum, although the Martinez court concluded that the wage order definitions of the employment relationship apply in civil actions for unpaid minimum or overtime wages under section 1194, the court ultimately affirmed the trial court and Court of Appeal decisions in that case rejecting the workers' claims that the defendant produce merchants were the workers' employers for purposes of section 1194. Martinez v. Combs, 49 Cal. 4th 35, 69 (2010).
 
It should also be noted that the Martinez court stated the “suffer or permit to work” definition was taken from statutes which prohibited child labor laws from the early 1900's.  They imposed liability on the employer “based upon the defendant’s failure to exercise reasonable care to prevent child labor from occurring.” Martinez v. Combs, 49 Cal. 4th 35, 58 (2010). This definition goes way past the traditional common law employment relationship.
 
In Dynamex, the defendant argued that the Martinez decision was limited to joint employment questions and that Borello’s multifactor test was the controlling test. Importantly, the Dynamex court found no basis to limit the Martinez case to the joint employer context.  “[W]e conclude that the suffer or permit to work standard properly applies to the question whether a worker should be considered an employee or, instead, an independent contractor, Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 43, (2018).
 

“Employed” and “employ” - three definitions

 
Thus, under Dynamex (taken directly from Martinez) a worker is an employee if she is “employed” by an “employer.”  Which are taken directly from the wage orders. And employ is defined as:

 (a)  exercise control over wages, hours or working conditions.
 (b) to suffer or permit to work, or
 (c) to engage - thereby creating a common law employment.
 
If any of these standards are met, the worker is an employee and not an independent contractor.
 
The Dynamex case further analyses the “suffer or permit” to work standard and holds that ABC test is the proper standard for determining work status under the “suffer or permit” to work.

San Diego Attorney Journal called Bill Turley:

California's Leading Wage and Hour Class Action Lawyer

 

The “suffer or permit” standard is not limited to joint employer cases

“Thus, Martinez demonstrates that the suffer or permit to work standard does not apply only to the joint employer context, but also can apply to the question whether, for purposes of the obligations imposed by a wage order, a worker who is not an  “admitted employee” of a distinct primary employer should  nonetheless be considered an employee of an entity that has “suffered or permitted” the worker to work in its business. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 943, (2018). 
 
In effect, the California Supreme Court held that many folks had been interpreting the holding in Martinez too restrictively. And under Dynamex, the Martinez suffer or permit standard also applies to anytime employer is arguing that an worker is not an employee, including that the worker is an independent contractor. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 943, (2018).


Ayala - the right to control and not the extent of its exercise, gives rise to the employer-employee relationship

Ayala is a California Supreme Court case where a wage and hour action was filed on behalf of newspaper carriers who had been hired by the Antelope Valley Press (Antelope Valley) to deliver its newspaper. The carriers alleged that Antelope Valley had misclassified them as independent contractors when they should have been treated as employees.
 
The trial court in Ayala had denied the plaintiffs' motion to certify  the action as a class action on the ground that under the Borello test—which, at the trial level, both parties agreed was the applicable standard—common issues did not predominate because application of the Borello standard “would require ‘heavily individualized inquiries’ into Antelope Valley's control over the carriers' work.”  Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 529 (2014).
 
The California Supreme Court in Ayala held that  the trial court should not have denied class certification on the basis that there were individual variations in whether the newspaper exercised control and that control was not pervasive because the relevant inquiry was whether the newspaper's right of control over its carriers, whether great or small, was sufficiently uniform to permit classwide assessment.
 
The Supreme Court in Ayala held that under the Borello multifactor test control over how a result is achieved lies at the heart of the common law test for employment. S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 350 (1989). Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 529, 533 (2014).
 
The Ayala court stated: “Significantly, what matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. The existence of such right of control, and not the extent of its exercise, gives rise to the employer-employee relationship. Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 529, 533 (2014).
 

Currently, is the common law test for employment in California no longer the Borello multifactor test, but rather the ABC test?

 
The Ayala decision made it easier to certify a case under this theory because all the employee has to be able to prove is the right to control. This allows you to sidestep the “individualized issues” presented by testimony of the various workers and/or management of how much control was actually exercised. 
 
Importantly, the California Supreme Court in the Dynamex case held that the Ayala case did not resolve the question of whether Borello multifactor test (read: the common law test) is applicable to wage order claims, because the parties agreed and the employee conceded in Ayala that the Borello multifactor test was the proper test in that case.  Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 941-942  (2018). 
 
Importantly for understanding how Ayala fits into the Dynamex decision is that the Ayala plaintiffs proceeded on the sole basis that they are employees under the common law. Thus the Ayala case was resolved by applying the common law test for employment, without considering these other tests.   Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 530-531 (2014).
 
Thus the Ayala court applied the Borello multifactor test to the common law question of determining whether the newspaper workers were employees or independent contractors.  The Ayala court clarified that Borello control factor is the “right to control” as opposed to an “actual control” test.
 
The Dynamex court held that Borello multifactor test was not the only test that should be used to determine whether a worker is an employee or independent contractor because the parties in Ayala stipulating to proceeding solely under Borello multifactor test. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 941 (2018).
 

Determining whether a worker is an employee or independent contractor under the California Wage Orders - the Dynamex case and the ABC test

 
In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court held that law presumes that all workers are employees instead of contractors, and places the burden on any entity classifying an individual as an independent contractor of establishing that such classification is proper under the“ABC test.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018).    
 
The court held that in determining whether to classify workers as employees or as independent contractors for purposes of California's wage orders, the “suffer or permit to work” standard set forth in the wage orders requires a hiring entity asserting independent contractor status to establish each of the three factors of the ABC test and show that a worker is free from its control, performing work outside the usual course of its business, and customarily engaged in independent work. A sufficient commonality of interest under part of the ABC test adequately supported the trial court's certification order. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018).


A quick background of Dynamex 

 
Dynamex is a nationwide courier and delivery service that specializes in on-demand, same-day pickup and delivery services. Before 2004, Dynamex classified its California drivers as employees. Starting in 2004, however, Dynamex converted all of its drivers to independent contractors as a cost savings measure for the company. Under the current policy, all drivers are treated as independent contractors by the company and are required to provide their own vehicles and pay for all of their transportation expenses, including fuel, tolls, vehicle maintenance, and vehicle liability insurance, as well as all taxes and workers' compensation insurance. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 917 (2018). In other words, the drivers are being screwed by the company in order for the company to save money. Meaning, the drivers are getting shafted by the company.
 

Like most of the California Supreme Court’s recent decisions on California wage laws - it’s all about public policy (read; doing the right thing to help workers)... this is important so don't skip over this (it's about your money/ wages)

 
The California Supreme Court gets it. The Dynamex decision starts off with a framing of the issue based upon fundamental public policy:
 
“[I]f a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing workers' compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. The worker then obtains the protection of the applicable labor laws and regulations. On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits, and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.
 
Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees. In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled.
Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903,912-913 (2018).


The California Supreme Court points out the problem with the Borello “multifactor” test - it “invites employers to structure their relationship with employees in whatever manner best evades liability”

 
In a nutshell, the Supreme Court realized that the “multifactor test” set forth in the Borello case is a terrible test that allows companies to get away with improperly characterizing employees as independent contractors. As I have been saying for years, the Borello test is a Rorschach test. Meaning, that 10 different people will look at the same facts and come to 10 different conclusions.  Just like looking at ink blots.
 
As the California Supreme Court observed, “the use of a multifactor, all the circumstances standard affords a hiring business greater opportunity to evade its fundamental responsibilities under a wage and hour law...” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 955 (2018).
 
The Dynamex court quoted a law review article that stated, “[t]he legal test for determining employee/independent contractor status is a complex and manipulable multifactor test which invites employers to structure their relationships with employees in whatever manner best evades liability.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 955 (2018).


A closer look at the ABC test

 
One must keep in mind the disadvantages posed by the Borello multifactor test in order to fully appreciate the simplicity and powerful worker protection provided by the ABC test.
 
The Dynamex court held that in determining whether to classify workers as employees or as independent contractors for purposes of California's wage orders, the “suffer or permit to work” standard set forth in the wage orders requires a hiring entity asserting independent contractor status to establish each of the three factors of the ABC test and show that a worker is free from its control, performing work outside the usual course of its business, and customarily engaged in independent work. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 963 (2018).
 

Part A of the ABC test:   Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?

 
The Supreme Court points our in Dynamex that the Martinez decision makes clear...  “the suffer or permit to work definition was intended to be broader and more inclusive than the common law test, under which a worker's freedom from the control of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact, was the principal factor in establishing that a worker was an independent contractor rather than an employee. Accordingly, because a worker who is subject, either as a matter of contractual right or in actual practice, to the type and degree of control a business typically exercises over employees would be considered an employee under the common law test, such a worker would, a fortiori, also properly be treated as an employee for purposes of the suffer or permit to work standard.”  Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 958 (2018).  

The Dynamex court further points out, as under Borello, depending on the nature of the work and overall arrangement between the parties, a business need not control the precise manner or details of the work in order to be found to have maintained the necessary control that an employer ordinarily possesses over its employees, but does not possess over a genuine independent contractor. The hiring entity must establish that the worker is free of such control to satisfy Part A of the ABC test. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 958 (2018).  
 

Don't get confused between the control factor in the Borello multifactor test and the ABC test

 
Part A of the ABC is simply the control factor in the Borello multifactor test. Without all of the confusion “secondary factors” that are found in Borello/ CACI 3704 multifactor test.
 
Remember it was all the other factors that made Borello/ CACI 3704 multifactor test confusing and allowed employers to evade having to classify workers as employees.
 
Under the ABC test, if there is actual control or contractual control in the performance of your work, then you are an employee under the ABC test. It bears emphasis that the company has the burden of proving that you free of such control in order to satisfy Part A of the ABC test.

Make no mistake about it, the simplicity of Part A is the powerfulness of it.

 

Part B of the ABC test:  Does the worker perform work that is outside the usual course of the hiring entity's business?

 
By focusing on the usual course of the hiring entity’s business, the Part B includes all individuals who are reasonably viewed as providing services to the business in a role comparable to that of a traditional employee, rather than that of a traditional independent contractor. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 959 (2018).
 
The issue in Part B comes down to what is the usual course of the company’s business:
 
Thus, on the one hand, when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store's usual course of business and the store would not reasonably be seen as having suffered or permitted  the plumber or electrician to provide services to it as an employee. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 959 (2018).
On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will  be sold by the company or when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes, the workers are part of the hiring entity's usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees. In the this setting, the workers' role within the hiring entity's usual business operations is more like that of an employee than that of an independent contractor. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 959 -960 (2018).
 
Dynamex’s entire business is that of a delivery company.  The truck drivers that Dynamex characterized as independent contractors were performing a role in the usual business operations of Dynamex. That is, delivering packages for customers.
 
Thus, the California Supreme Court found that the drivers for Dynamex were employees under Part B of the ABC test. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 965 (2018).
 

The logic behind Part B of the ABC test is to protect workers from businesses that are trying to avoid having to provide the powerful rights and remedies afforded to employees under California law

 
Treating all workers whose services are provided within the usual course of the hiring entity's business as employees is important to ensure that those workers who need and want the fundamental protections afforded by the wage order do not lose those protections. If the wage order's obligations could be avoided for workers who provide services in a role comparable to employees but who are willing to forgo the wage order's protections, other workers who provide similar services and are intended to be protected under the suffer or permit to work standard would frequently find themselves displaced by those willing to decline such coverage. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 961-962 (2018).
 
The drivers that worked for Dynamex are illustrative of this point.
 
Accordingly, a hiring entity must establish that the worker performs work that is outside the usual course of its business in order to satisfy part B of the ABC test. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 961 (2018).
 

Part C of the ABC test:   Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?

 
The suffer or permit standard expansively defines who an employee is. And based upon the Dynamex case, it is intended to to prevent “a business from evading  the prohibitions or responsibilities embodied in the relevant wage orders directly or indirectly—through indifference, negligence, intentional subterfuge, or misclassification. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 961-962 (2018).

It is well established, under all of the varied standards that have been utilized for distinguishing employees and independent contractors, that a business cannot unilaterally determine a worker's status simply by assigning the worker the label “independent contractor” or by requiring the worker, as a condition of hiring, to enter into a contract that designates the worker an independent contractor.”   Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 961-962 (2018).
 
The Dynamex court observed:
 
As a matter of common usage, the term “independent contractor,” when applied to an individual worker, ordinarily has been understood to refer to an individual who independently has made the decision to go into business for himself or herself. Such an individual generally takes the usual steps to establish and promote his or her independent business—for example, through incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like. When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor by the unilateral action of a hiring entity, there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification.
 
A company that labels as independent contractors a class of workers who are not engaged in an independently established business in order to enable the company to obtain the economic advantages that flow from avoiding the  financial obligations that a wage order imposes on employers unquestionably violates the fundamental purposes of the wage order. The fact that a company has not prohibited or prevented a worker from engaging in such a business is not sufficient to establish that the worker has independently made the decision to go into business for himself or herself.
 
Accordingly, in order to satisfy part C of the ABC test, the hiring entity must prove that the worker is customarily engaged in an independently established trade, occupation, or business.
Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 962-963 (2018). (Emphasis added). 
 

In order to prove the ABC test - the company has to prove all three parts

 
The hiring entity is required to establish all three parts of the ABC standard. If the company fails to prove all three parts then you will be deemed to be an employee, rather than an independent contractor for purposes of enforcing the provisions of the wage order. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 962-964 (2018).
 

Under the ABC test there is less opportunity for companies to manipulate and evade beng found to be an employer than there is under the Borello multifactor test

 
As the Dynamex court observed, under the ABC test “will provide greater clarity and consistency, and less opportunity for manipulation, than a test or standard that invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 964 (2018).


The wage orders not only protect workers - but the wage orders also benefit law-abiding businesses “to prevent a “race to the bottom”

 
“...California's industry-wide wage orders are also clearly intended for the benefit of those law-abiding businesses that comply with the obligations imposed by the wage orders, ensuring that such responsible companies are not hurt by unfair competition from competitor businesses that utilize substandard employment practices.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 952 (2018).
 
The Supreme Court in Dynamex went on to state, “[T[he additional purpose of wage orders to protect companies that in good faith comply with a wage order's obligations against those competitors in the same industry or line of business that resort to cost saving worker classifications that fail to provide the required minimum protections to similarly situated workers. A wage order's industry-wide minimum requirements are intended to create a level playing field among competing businesses in the same industry in order to prevent the type of “race to the bottom” that occurs when businesses implement new structures or policies that result in substandard wages and unhealthy conditions for workers. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 960 (2018).
94-95


The wage orders also protect the public

 
“...the minimum employment standards imposed by wage orders are also for the benefit of the public at large, because if the wage orders' obligations are not fulfilled the public will often be left to assume responsibility for the ill effects to workers and their families resulting from substandard wages or unhealthy and unsafe working conditions.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 952 (2018).
 

Dynamex clears up “suffer or permit” and working in the hirer’s business

The Dynamex court helped clear up the suffer or permit to work standard:
 
 “[A]s our decision in Martinez recognized, the suffer or permit to work standard must be interpreted and applied broadly to include within the covered “employee” category all individual workers who can reasonably be viewed as “working in [the hiring entity's] business.... ‘A proprietor who knows that persons are working in his or her business without having been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so.... Under the suffer or permit to work standard, an individual worker who has been hired by a company can properly be viewed as the type of independent contractor to which the wage order was not intended to apply only if the worker is the type of traditional independent contractor—such as an independent plumber or electrician—who would not reasonably have been viewed as working in the hiring business. Such an individual would have been realistically understood, instead, as working only in his or her own independent business. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 953 (2018).


The powerfulness of the ABC test

 
The ABC test is powerful. Under the law, you are presumed to be an employee. The company has the obligation that each of these requirements be met for the presumption that you are an employee to be rebutted and for the court to recognize that you have been properly classified as an independent contractor by the company.
It’s simplicity is it’s powerfulness.
 
Remember, that when a jury is confused - you will lose your case. There is no confusion in the ABC test. And if the company can’t prove all three Parts of the ABC test - you win.
 

It’s a whole new ball game

 
No longer will companies be able to slap a label on a worker and know that they have a decent shot of getting away with not providing you with wage benefits, paying your Social Security, workers’ compensation, unemployment benefits and such.
 
If a company uses independent contractors to provide their core service or product - like the Dynamex does with their delivery drivers, which is the very core of Dymanex’s business model - then under Part B the company will be held to be the employer. And under the Dynamex decision, this is suitable to being resolved on a class wide basis. Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 965 (2018).
 
Many businesses in California quite obviously have improperly have classified workers as independent contractors when they are employees. From trucking companies to bakeries to law firms to medical groups to almost all of the so-called “gig economy” companies. 
 
This has given them an unfair advantage over their competitors. This has fueled a race to the bottom in many industries as far as wages are concerned, just like the California Supreme Court said it would in Dynamex.
 

What ‘s still up in the air post Dynamex

 
The Supreme Court specifically left one question unanswered in the Dynamex case.
 
Whether the ABC test applies to wage claims that do not arise under the wage orders?  My response to that is have you read these recent California Supreme Court decisions: Brinker, Augustus, Williams, Alvarado,  Dynamex and Troester?  I submit that the California Supreme Court gets it. That the purpose of the Labor Code and the Wage Orders is to protect workers.
 

If you are a company are you going to bank on the Supreme Court allowing workers to not being reimbursed their business expenses under California Labor Code Section 2802? 

 
If you do, then you deserve to be sued. We'll see you in court. 
 
What you can expect companies that still use independent contractor to try and create gray areas in the law. For example, you can expect some company lawyers to argue over how to define what may be in the usual course of course of business under Part B.
 

Here is what you do know

 
When companies are caught dead to rights stealing worker’s wages, the company rarely ever admits that they stole them. Instead, you can expect them to hire attorneys to argue that the law can be defined in different ways.
 
 

If you're working for a company and they call you and independent contractor - what should you do? 

 
The short answer is that you need to lawyer up. You may be owed a whole lot of money in unpaid wages. 
 
You can call us at 619-234-2833 
 
Or fill out the contact form on this website 
 
 

Your mileage may vary

 

Bill candidly points out that there are no guarantees that any lawsuit, wage class action case, and/or PAGA case will be successful and/or whether anyone will recover money, wages and/or penalties. There are any number of reasons why these cases are defeated, aren’t certified and/or are unsuccessful. Every case is different. Every situation is different. Every case has different facts, evidence and defenses.

 

In other words, your mileage may vary. Just because Bill has won huge settlements in so many other unpaid wages cases doesn't mean he will in your case. 

William Turley
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“When I seek out professional advice, I don’t want B.S., I want it straight up. I figure you do also.”
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