California Supreme Court Delivers Strict Definition of Employee v. Independent Contractor
In California Workers' Compensation, the question of whether someone is an independent contractor or an employee is important. An Independent Contractor is not entitled to Workers' Compensation protections, while an employee is. However, just because you filled out a 1099 form doesn’t mean that you are an independent contractor. Companies often classify someone as an independent contractor when in fact they are an employee. They do this for several reasons: avoiding workers' compensation premiums, employment taxes, and social security payments. This is a dangerous risk, not only for the potential penalties to the employers, but for the health of the employees. A misclassified employee doesn't have access to medical care in the event of an injury.
This practice is often done under the ruse that the statutes and case law are confusing. However, on Monday, April 30, 2018, the California Supreme Court delivered a new benchmark for determining whether someone is an independent contractor or an employee. The new standard, a three-part test, is much more restrictive than previously. The three-part test the court created in Dynamex Operations West Inc. v. Superior Court of Los Angeles County (Lee) asks whether a worker meets any of the following criteria:
1. Is the person free from control and direction in the performance of their work?
2. Is the person performing work outside the scope of the hiring entity’s business?
3. Is the person customarily engaged in an independently established trade?
If the answer to any of the three questions is “no,” the person is an employee, subject to various labor law protections - including minimum wages, and meal and rest periods. This would also mean these standards apply to Workers' Compensation laws.
In the new gig economy, the question of whether someone who is classified as an independent contractor is really an employee comes up constantly, especially in the world of California Workers' Compensation injuries. Under this new standard, it would be hard to meet the independent contractor standard for most, other than completely independent tradespeople.
If you are classified as an independent contractor and were injured on the job, there is a good chance you have been misclassified and are entitled to California Workers' Compensation benefits.
To read the full decision of the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County click here.