California Supreme Court Takes a Sharp Turn in Decision Involving Classification of Delivery Drivers

The California Supreme Court has taken a significant step away from the long-used multifactor test to determine whether individual workers are employees or independent contractors, and toward a test that presumes workers in California are employees as opposed to independent contractors. 

In Dynamex Operations West, Inc. v. Superior Court, published on April 30, 2018, the Court upheld the certification of a class of delivery drivers, and rejected the delivery company’s argument that its drivers were properly classified as independent contractors under the multifactor test. Under this test that has been applied in California for decades, courts have historically taken a number of factors into consideration, with the focus being on the extent to which a business controls a worker. In Dynamex, the Court turned away from this traditional test, and instead expressly adopted the state Industrial Welfare Commission’s (“IWC”) definition of employment. Under the IWC definition, a worker is an employee if the business “engage[s], suffer[s] or permit[s]” the individual to work.

Under the Court’s decision, the burden will now be on businesses to demonstrate that an individual worker is an independent contractor as opposed to an employee. This new standard: “(1) plac[es] the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order’s coverage; and (2) requir[es] the hiring entity, in order to meet this burden, to establish each of the three factors embodied in the ABC test – namely, (A) that 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; and (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 independently established trade, occupation, or business of the same nature as the work performed.”

What Employers Should Know Now

The Court’s ruling in Dynamex will serve to further fuel an already rapidly-expanding area of litigation, particularly with “gig economy” businesses that provide flexible on-demand deliveries and work schedules for the convenience of customers and workers. Now is a good time for businesses with independent contractors to evaluate classifications to determine if they are supportable under the Court’s ruling.