In The recent California Supreme Court ruling in Dynamex Ops. West, Inc. v. Superior Ct., held that a worker will be considered an employee of the “hiring entity” for purposes of the Wage Orders unless the “hiring entity” can establish all threeof the following factors:
- The worker is free from the control and directionof the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact
- The worker performs work that is outside the usual course of the hiring entity’s business
- The worker is customarily engaged in an independently established trade, occupation, or business
The “hiring entity’s” failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an employee for purposes of the Wage Orders. This is a drastic change to the Independent Contractor classification and will have significant effects on those business who choose to still attempt to classify individuals as independent contractors. If you use independent contractors you need to give us a call and ensure you are in compliance with this new court decision.
Not all workers are employees, as they may be volunteers or independent contractors. Employers may improperly classify their employees as independent contractors so that they do not have to pay payroll taxes, the minimum wage, overtime, comply with other wage and hour law requirements such as providing meal periods and rest breaks, or reimburse their workers for business expenses incurred while performing their jobs. Additionally, employers do not have to cover independent contractors under workers’ compensation insurance, and are not liable for payments under unemployment insurance, disability insurance, or social security. Because the potential liabilities and penalties are significant if an individual is treated as an independent contractor and later found to be an employee, each working relationship should be thoroughly researched and analyzed before it is established.