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California Supreme Court adopts new ruling on contractors

The gig economy is certainly a major part of the employment landscape here in California and elsewhere. It is certainly an economical way for companies to bring in workers without the rules governing employment law. There has been some confusion in recent years over rules determining whether workers are independent contractors or employees. This has led to misunderstandings by both companies and workers.

Now the California Supreme Court has a new test to determine the difference based on the state’s Industrial Welfare Commission (IWC) Wage Orders. It applies to delivery drivers and addresses such obligations as minimum wage, maximum hours and specific conditions regarding work. This is based on a class action brought by two delivery drivers working for a same-day delivery and courier service, which switched from employees to contractors in 2004.

The ABC ruling

While this ruling specifically applies to drivers, it could be adopted to apply more broadly to evaluating employment classifications in other professions. According to an article, the burden has gone from proving the worker is not an employee to proving the worker is not an independent contractor. The worker is an employee only if the job fits all of these criteria:

  1. The worker is free from control and direction by the hirer in the performance of the job
  2. The work performed is outside the usual course of the employers business
  3. The worker performs the same or similar work for a variety of different businesses

The immediate reach

This unanimous ruling by the court could have an impact on workers for Uber, Lyft and other franchises that use a ride-hailing app. This test does not recognize the realities of the franchise relationship or its business model. As this ruling goes into effect and is interpreted, this test will be open to interpretation and could have a broad influence. Drivers and others who are pushed to become contractors would be wise to discuss these changes with an experienced employment law attorney to see if their rights are properly protected.

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