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Independent Contractor? California Employers Now Face Tougher Rules

California adopts new independent contractor test

The California Supreme Court, in a groundbreaking decision this month, adopted a new legal standard for classifying workers as independent contractors, dramatically changing California employers' legal burden.

This decision expands the definition of "employee" under the California Wage Orders and imposes an affirmative burden on companies to prove that independent contractors are being properly classified.

The ruling has the potential to affect nearly all industries, especially those doing business in the emerging gig economy. It is critical that all California businesses who employ independent contractors conduct a thorough evaluation to determine whether these workers are properly classified.

As a result of the California Supreme Court's decision, the court adopted a new standard for determining whether a worker is "employed" by a business. The new "ABC" test mandates that a worker IS an employee unless the business meets all three of the following criteria:

  • 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.

To learn more, please see our blog post, here.

Please Contact Us with your concerns about your workforce. We can help you determine which of your workers are employees and which are independent contractors based on California's new ABC rule.



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