Court Backs 'ABC' Test: 'This Could Ruin the Gig Economy'

03 May, 2018, 12:11 | Author: Lillian Steele
  • Court Backs 'ABC' Test: 'This Could Ruin the Gig Economy'

Plaintiff, a Dynamex driver classified as independent contractor, alleged that Dynamex improperly classified its drivers as independent contractors instead of employees, depriving those drivers of the protections provided by the California Labor Code and applicable wage order.

The Court concluded that the "suffer or permit to work definition is a term of art that can not be interpreted literally in a manner that would encompass within the employee category the type of individual workers. who have traditionally been viewed as genuine independent contractors who are working only in their own independent business". To be an independent contractor, a worker must be free from the company's control and direction in the way they perform a task. The ruling came in a lawsuit against a package and document delivery company called Dynamex that was accused of misclassifying drivers as contractors. While the drivers were generally free to set their own work schedules, they had to notify the company of the days they meant to work in advance. Additionally, drivers used their own vehicles, but wore company badges and shirts (purchased with their own funds), and sometimes were required to attach company or customer decals to their vehicles when making deliveries.

As SF Chronicle noted, Justice Cantil-Sakauye's ruling applies to disputes under state Industrial Welfare Commission orders, which set the standards for minimum wages and overtime payments for all employees, but not for independent contractors. Businesses that were forced to lay off thousands of employees were slow to rehire, finding they could fill needs with temporary workers and independent contractors, who performed jobs for more than one company.

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As an example, the court said a plumber hired by a retail store to fix a bathroom leak is not performing work that is part of the store's usual business.

The court held that the businesses that misclassify employees as contractors gain an unfair competitive advantage over competitors that strictly follow the rules. Dynamex appealed the certification decision to the California Court of Appeals, arguing that the definition of "employee" as set forth in the Martinez case was limited to a joint employer context.

These narrow requirements will force many California employers to re-examine their worker classifications and make adjustments where necessary to meet this test. This is the first new test for independent contractor status in California in almost 30 years.

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