Written by Gordon Webster, Jr.
If you hire independent contractors in the course of your daily business in California, big changes may be coming your way and you might not yet know about it.
It all has to do with a California Supreme Court ruling back in April. In what is called the “Dynamex” case, the court created a new standard on whether independent contractors should be considered employees.
It’s called the ABC test. Basically, in order for an independent contractor to be considered as such, the hiring entity must establish each of the following factors (or else you better get a W-2 form ready):
(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.
Today’s print edition of The Business Journal features a story about the ABC test, and about the confusion and worry it is causing in the local business community.
The next line of defense against this new classification would probably need to come from the state legislature. Assemblymember Melissa Melendez (R-Lake Elsinore) this week introduced AB 71, which would roll back the precedent set in the Dynamex decision.
“Sacramento is dominated by powerful labor union special interests that have constantly stood in the way of independent workers,” said Melendez. “My attempt this past session, to shed some light on this issue, was stifled by those special interests. Without clear legislative action, the Dynamex case could unravel gig and tech economies and threaten the traditional business models of REALTORS, teachers, beauticians, truck drivers, construction trades and countless other professions.”
The challenge is that California has a supermajority of Democrats in the legislature. It’s probably not a bad time to contact your local member of the Assembly or Senate, and ask them to refrain from further unraveling our state’s economy.
The Business Journal will also be devoting special effort to keeping the local business community informed as the ABC test issue rolls out.