In a decision that is expected to rock the world of employment law and gig economy, the California Supreme Court has adopted a rigid three-part test for deciding whether a worker is an employee or an independent contractor for purposes of California wage orders, which impose obligations relating to the minimum wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.
This new test will make it practically impossible for app platforms such as Uber and Lyft to continue classifying their drivers as "contractors" in California. Wow. Will other states pick up on this?
Dynamex Operations West, Inc. v. Superior Court (California Supreme Court 04/30/2018) [PDF] unanimously held that a worker is presumed to be an employee unless the hiring entity can establish all three of the following:
(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.
This is being described as "a bombshell decision," the “contractor apocalypse," "a rigid three-pronged test that will appear in the nightmares of your average gig economy business executives," and "Misclassification Doomsday." See Contractor Apocalypse.