When you’re injured at work, whether or not you qualify for worker’s comp benefits may hinge on whether or not you’re an employee or an independent contractor. And in California, that’s up for debate.
An April 2018 ruling by the California Supreme Court has made it more difficult for businesses to classify workers as independent contractors—a classification that saves them around 30 percent over the cost of retaining actual employees when things like insurance are factored in. The ruling came about in a suit filed by Dynamex delivery drivers and makes use of a formula known as the ABC Test. This test determines if individuals are employees and not independent contractors by looking at whether (1) the company controls the work they do, (2) if the tasks they do are central to the core business of the company, and (3) if the individual does not run an independent business doing the work that the employer has hired them to do.
This ruling has a score of industries that make use of independent contractors up in arms with companies such as Lyft and Uber potentially affected. It will also affect more traditional types of independent contractors such as ER doctors, insurance agents, lawyers and architects. The ruling in the Dynamex case has not resulted in any widespread reclassification of independent contractors as employees, and lawmakers, workers and companies are now negotiating on what should happen next. Union representatives want to see this new ruling become set in stone moving forward, and it has been used as precedent in some legal cases to date.
In the Dynamex case, the ruling dealt only with pay. The court established with the ABC Test that workers meeting the parameters should be entitled to minimum wage and overtime pay. However, some lawmakers want to see the ruling go further, adding benefits like workers’ compensation, unemployment insurance, paid maternity/paternity leave, health insurance and sick days on the table for reclassified workers.
In opposition of the ABC Test, many trade groups and several companies have formed the I’m Independent coalition—DoorDash, Caviar, Lyft, Uber, Postmates and Instacart are all on board so far. California Chamber of Commerce executive vice president Jennifer Barrera said of the Dynamex decision: “Dynamex jeopardizes work opportunities for millions of individuals who want to maintain independent contractor status for a host of reasons.” Labor leaders and some lawmakers say, however, that workers who are “lower on the economic ladder” need to have their status as employees protected.
When an employer classifies its employees as independent contractors, they gain several big advantages, including not having to pay payroll tax or comply with minimum wage or overtime requirements. They also do not have to comply with meal period and rest break requirements, reimburse workers for business expenses or, perhaps more importantly, provide coverage for worker’s compensation or disability insurance. The details of how this Dynamex ruling may reverberate throughout the workforce are still forthcoming and will be interesting to see unfold.
If you are an injured worker, contact our Los Angeles workplace injuries attorney right away to schedule a no-cost case review.
