As Published in the Sacramento Business Journal
The California Supreme Court’s ruling in Dynamex Operations West v. Superior Court adopted the “ABC test” to determine whether a worker is an employee or independent contractor. By narrowing the number of workers qualifying as independent contractors under certain laws, the decision impacts “gig economy” workers such as rideshare drivers, childcare workers and freelance designers. Although the ruling has been framed as a “win” for workers and a protection against work without benefits, it may actually limit options and opportunities for the workers it intends to protect.
Under the “ABC” test, a worker is an employee unless: (1) the worker is free from the hiring party’s direction and control over how the work is to be performed, (2) the work to be performed is outside the usual course of the hirer’s business, and (3) the worker customarily engages in an independently established trade, occupation or business of the same nature as the personal services the worker provides. If any of these requirements are not met, the worker will be classified as an employee.
Many people want the freedom to choose their own hours and work schedules, including those who wish to spend time rearing their children, retirees or those who want to do a variety of types of work. If businesses eliminate the independent contractor model simply because workers are performing functions in the ordinary course of the hirer’s business, those most likely to go by the wayside are low-level workers, those that prefer to work part-time, or those working a more flexible schedule. People that want to work in several different capacities may be unable to find the balance of hours that suits them.
For example, independent contractors usually have the ability to decline particular work. A “gig economy” driver has discretion over the areas where they work, the time of day they work and the fares they accept. In contrast, employee-drivers may be required to work specific hours, take every shift and accept every fare that an employer assigns them.
Likewise, most employers do not take kindly to their employees working for competitors. As an independent contractor, a driver can work simultaneously for two ride-sharing companies, providing a choice of more lucrative opportunities from those collectively available. Mandating that a worker’s services be performed outside the context of the ordinary course of the hirers’ business can destroy entrepreneurial opportunities and limit the amount that a worker is able to earn. Ultimately, Dynamex does not help California workers who prefer the freedom and flexibility available in independent contractor relationships.
What can be done? Fortunately, courts are already recognizing the limited scope of Dynamex, ruling recently that the test does not apply when determining joint employment status of a worker already classified as an employee. The Legislature also has power here and can protect the many Californians whose personal circumstances limit their ability to work in traditional nine-to-five positions as well as the creative entrepreneurs who use this flexibility to build new California businesses.
Cass Ferrannini is an employment law attorney at Downey Brand LLP.