Employers Battle Labor Over Whether "Dynamex" Should Become State Law
Employers began organizing against the April 2018 Dynamex decision as soon as the California Supreme Court released the far-reaching, three-prong “ABC” test. Led by the California Chamber of Commerce and others, employers are lobbying the legislature to limit the reach of the decision and revert to the multifactor Borello test, in place before Dynamex, which was considered more advantageous to employers.
When the legislature reconvened in early December, though, it was labor that was first out of the gate with a bill introduced by Lorena Gonzalez (D-San Diego), AB 5, to codify Dynamex and “clarify the decision’s application in state law.”
However you come down on employee v. independent contractor classification, or where you stand on AB 5, it makes sense to address the issue head on in the legislature, rather than piecemeal in the courts. In the meantime, employers need to be extremely cautious on how they classify contractors versus employees. A safe bet is to assume that the ABC test in Dynamex will apply to all employer/employee relationships, not just wage and hour issues.
To review, under Dynamex, a worker is assumed to be an employee unless the hiring entity can establish:
- that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
- that the worker performs work that is outside the usual course of the hiring entity’s business; and
- that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Employers may be tempted to stretch these bounds, but the California Employment Development Department investigates aggressively when it audits company practices.
If you have questions, or you receive an inquiry from the Employment Development Department, contact employment counsel. Don’t assume that Dynamex is in danger.