California landed a major blow to our workforce and it’s affecting millions.
Are YOU an independent contractor? Take this test to find out.
Are you a hairstylist? A truck driver? Graphic designer? If you are, then you might be affected by the Supreme Court Ruling that took place on April 20, 2018.
California now has one of the most stringent tests for Independent Contractor Status in the country.
Independent contractors are filed under the provisions of a 1099 form that, until recently, allowed a great deal of flexibility for workers in a variety of fields. There are a lot of benefits to being classified as an independent contractor…flexible hours, choosing who you work for, getting to work from home, etc. But due to the findings in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, things are about to get tricky…
There is now a three-pronged measure of what classifies an independent contractor called the “ABC Test”. Here is information sourced from an article written by Ashton Riley, a California employment lawyer.
Prong A: Free from Control and Direction
This fist prong is not that different from the classification test previously used.
The court concluded that a worker who is, either by contract or by practice, subject to the type and degree of control a business typically exercises over employees should likewise be considered an employee. Accordingly, businesses must now establish that workers are free of such control to meet this part of the test.
Think of it this way: Does the individual need to show up at 8am like the other employees? Do they need to wear the dress code of the business? Does this individual follow the same training and hiring process as the companies employees? If the answer is yes, they would be considered an employee.
Prong B: Outside Usual Course of Business
This is where is gets tricky so pay attention…
Prong “B” is to determine whether workers can be viewed as individuals who are providing services to the business in a role comparable to that of an employee, rather than in a role comparable to that of a traditional independent contractor. Workers whose roles are “most clearly comparable” to those of employees include workers whose “services are provided within the usual course of the business” and thus would “ordinarily be viewed by others as working in the hiring entities’ business.”
This prong is ambiguous and therefore causing employers to panic. Who determines what is “outside the usual course of business”? What are the exact guidelines?
The court used the example of a clothing store that hires a plumber to perform maintenance at its establishment; this worker would be hired outside of the company’s “usual course of business” and would be able to demonstrate independent contractor status. Another example is a “clothing manufacturer that hires a work-at-home seamstress or a bakery hiring a cake decorator which would typically not be able to demonstrate independent contractor status.”
Prong C: Customarily Engaged in Independent Trade
The “C” prong is to identify workers that have created their own independent business.
If workers have independently made the decision to go into business for themselves, they are likely to be found as satisfying this third prong. However, if they are “simply designated as an independent contractor by the unilateral action of a hiring entity,” there is a risk they would actually be classified as employees.
In order to be properly classified as an independent contractor, you must meet ALL THREE PRONGS of the ABC test.
If you’re still confused about how this new ABC test works and how it will affect you, please read Part 2 of my blog series.
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