The California Supreme Court changed the test to determine what is an independent contractor vs. employee to a new “ABC” test. The 2nd prong, is the tough one for employers.
Dynamex Operations West, Inc. involved a trucking company which changed its policy from classifying drivers as employees to independent contractors. The Court applied a new “ABC” test that requires an independent contractor to pass ALL three tests:
- 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 the work and in fact.
- That the worker performs work that is outside the usual course of the hiring entity’s business.
- 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.
- Note: For some business, such as realtors, under Business & Professions Code § 10032, the law specifically declared that real estate licensed salespersons and brokers may choose an independent contractor relationship even though they are subject to real estate laws requiring broker supervision and salespersons activity to be conducted under only one broker’s license.