An explosive legal opinion was issued by the California Supreme Court in April of this year, as they weighed in on a landmark land mined issue that is sure to impact and proliferate more California Wage & Hour Lawsuits.  A question that has always plagued companies is what constitutes an employer/employee relationship versus an employer/independent contractor relationship.  The California Supreme Court answered a few questions that people ponder such as:

“Am I an independent contractor or an employee?”

“In California how can I tell if I’m an employee or an independent contractor?”

“Am I entitled to overtime in California?”

The California Independent Contractor vs. Employee test is called the ABC Test, although some would argue there is nothing ABC about it.

The first and most important facet of the way the California Supreme Court addressed the issue is to view it from the prism that by default workers are employees, not independent contractors, and the employer has the burden to show otherwise.  In furtherance of illustrating that a worker is indeed an independent contractor and not an employee, the employer must establish all three prongs of the ABCs:

(A) 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

(B) The worker performs work that is outside the usual course of the hiring entity’s business; and

(C) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

Another fascinating aspect of the ruling is its retroactivity, meaning the Court’s ruling is applicable to past situations, not just issues moving forward.

This case has massive implications to various different industries from exotic dancers to construction workers, from mechanics to temp workers.  Almost anyone can be viewed as an employee versus an independent contractor under the California standard and may be owed significant amounts of overtime and damages.

In recent years, class actions have been stymied by the use of arbitration clauses.  However, California also has a law called the Private Attorney General Act, also known as PAGA, which essentially deputizes the individual to bring an action through the government, and since the government can not be hamstrung by arbitration, then the case can proceed in court.

Forward thinking individuals may also anticipate a wave of Tax Qui Tam actions, also known as IRS whistleblower actions, as for larger companies that avoided paying millions in taxes there may be tax consequences.  This is a complicated issue as there may also be back taxes owed by the employee who was formerly considered an independent contractor.  Also, one should not forget if they are in the health care or defense contractor industry, the False Claims Act (FCA) and California False Claims Act may kick in if there is other ways in which the company is defrauding the government.

Dynamex has tilted the playing field to allow workers to receive rights and protections as workers, not just being able to summarily cast them out when someone is inconvenient to the company without consequences.  In order to see how Dynamex affects you or to learn more about your California overtime rights, whether you’re an independent contractor or an employee, call our wage and hour lawyers at (877) 561-0000. For wage and hour lawsuits and consultations, there is no money up front, the conversation is confidential, and the firm is only paid if we win your case.

Dynamex is Dynamite