The California legislature reportedly has no plans to address any time soon the state supreme court’s flawed Dynamex decision, which essentially rewrote the standard for determining whether someone is an employee. Assuming that’s true, it is unfortunate news for employers in the Golden State.
In a statement to Bloomberg Law, State Assembly Speaker Anthony Rendon confirmed that the legislature will not take up any bill to address the Dynamex ruling before adjourning the current session on August 31. As a result, businesses that utilize independent contractors will be governed by the court’s new and not-so-improved standard using the so-called ABC test, which makes it much more difficult for employers to establish that someone is an independent contractor rather than an employee.
As this blog recounted in May, the Dynamex case involved a nationwide package and document delivery company that allegedly misclassified its drivers as independent contractors. Two Dynamex drivers filed a complaint against the company accusing it of violating California’s Industrial Welfare Commission Wage Order Number 9, which regulates wage and hour issues in the transportation industry, and state labor laws
In its April 30 decision, the California supreme court abandoned its so-called Borello test, which consisted of eleven factors established by the court’s 1989 decision in S. G. Borello & Sons, Inc. v Dept. of Industrial Relations. That decision complicated matters in its own right—a dissenting justice even referred to it as “one of the sadder episodes in the history of this court”—by abandoning longstanding precedent to make it more difficult for employers to establish an independent contractor relationship.
Under the court’s new, more expansive ABC test, a purported employer must satisfy all three of the following conditions in order prove an individual is an independent contractor rather than employee:
(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;
(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.
As the court noted, in many states an employer may satisfy part B by establishing that the work in question is performed outside all its places of business. Not to be outdone, the court deliberately removed that element from part B of its new standard, thereby forcing employers to classify an individual as an employee unless that person has essentially no connection to the employer’s business.
The business community in California had sought executive or legislative relief to address Dynamex while lawmakers develop a more thorough—and reasonable—standard for employment classification. With the end of the session in just two weeks from today, though, it appears California’s lawmakers will not get the chance to do even that until the next session begins in December. In the meantime, businesses there will continue to grapple with the sweeping effects of an ill-conceived judicial ruling.