A Roundtable lunch and learn in the Fresno Chamber of Commerce. Members of the California Chamber of Commerce and local business owners and independent contractors met to discuss the controversial “ABC Test” Supreme Court ruling.
Written by Frank Lopez
A controversial court ruling from the California Supreme Court on independent contractors has employers across all industries anxious about fallout.
In April, The California Supreme Court issued its stance on Dynamex Operations West, Inc. v. Superior Court, ruling that all workers are presumed to be employees, and establishes a new three-part test, dubbed the “ABC” test, that must be completely satisfied in order to be considered an independent contractor.
In 2004, Dynamex, a same-day delivery and courier service, adopted a new contractual arrangement with its delivery drivers and began to classify them as independent contractors, after which, drivers were required to provide their own vehicles for work and cover the transportation expenses including fuel, vehicle maintenance, vehicle liability insurance, and also all taxes and workers’ compensation insurance.
Two workers from Dynamex filed a lawsuit in 2005, and after nearly 13 years in court, the California Supreme Court issued its decision in April 2018, announcing the landmark ABC test.
With nearly 2 million Californians who choose to work as an independent contractors, according to the Bureau of Labor Statistics, contractors and employers alike are apprehensive of the changes.
San Diego Assemblywoman Lorena Gonzalez Fletcher, a Democrat, will soon introduce a bill to add to state law the “ABC test” which upturned three decades of legal precedent.
It is likely that the “ABC test” will become the standard for many areas of employment, and if a hiring entity fails any part of the test, then according to state labor law, an independent contractor will be considered an employee.
Under the “ABC test”, a worker is assumed to be an employee unless the three following factors can be proven:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such 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 for the hiring entity.
Business groups have raised alarms and have lobbied for the Legislature to intervene, as this court ruling could affect ambulance drivers, architects, attorneys, construction workers, hair stylists, truck owner and operators, and workers in virtually every other industry.
Since the ruling has yet to be codified, there are no national agencies putting the word out on in the matter, and chambers of commerce, along with business groups, all across the state are at the forefront of raising awareness.
Sonia Duarte, who with her husband Adolpho, co-owns Adolpho’s Barbershop in Sanger, says she was concerned with what the court ruling could mean for the barbers that work in their shop, as hairstylists and barbers rent out the seats at barbershops and work as independent contractors.
Duarte says that though the language in the test is clear, the (B) question on the test leaves her uncertain on how the test might affect their business.
“We’re not too sure it would affect us because we don’t really know what the standards are,” Duarte said. “Until we know that, we won’t know how much restructuring we’ll have to do. At this point we are in limbo until we hear more information.”
Duarte says they have contacted their financial and tax advisors who are doing their own research in order to stay compliant to whatever changes may come, and to see how the test could affect the barbershop.
On Dec. 1, the Fresno Chamber of Commerce hosted a Roundtable Lunch and Learn on the Dynamex ruling.
Marc Wilson, president and CEO of San Mar Properties, says that many contractors and business people aren’t aware of the ruling, and that he is worried that the new test could force him and others in his industry to go out of business, or for the ones who can afford it, to move out of California.
“If it [ABC Test] got fully implemented exactly as it is written, it would close my industry down,” Wilson said. “In property management, we all use subcontractors, and without them, we couldn’t hire enough employees to do the job.”
Policy Advocate for the California Chamber of Commerce Laura Curtis led the roundtable discussion, and went over important information regarding the case, and what business owners and independent contractors can do for their own businesses.
Curtis offers four pieces of advice for independent contractors and business owners to consider. “If you have 1099 individuals, contact your attorney and make sure you are properly complying. Get involved and reach out to Legislators and Senators in both the areas that you work in and live in and tell other people you know who hire independent contractors or are independent contractors about the issue.”