Recent Ruling Makes It Even More Difficult for Employers to Classify Workers as Independent Contractors

In a unanimous ruling on April 30, 2018, the California Supreme Court made it even more difficult for employers to classify their workers as independent contractors.  The decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County will have potential implications for companies such as Uber, Lyft and other app-driven services.  The ruling is further likely to lead many employers in California to immediately question whether they should reclassify independent contractors as W-2 employees rather than face stiff fines for misclassification.

The Supreme Court stated that, in order to classify someone as an independent contractor, a business must show that the worker is free from the control and direction of the employer; performs work that is outside the employer's core business; and customarily engages in an independently established trade, occupation or business.  "When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor...there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification," Chief Justice Tani Cantil-Sakauye wrote for the court.

This ruling resulted from a case filed against Dynamex Operations West Inc., a package and document delivery company that has listed as one of its clients.  The lawsuit charged Dynamex of misclassifying its delivery drivers as independent contractors rather than employees.

Source: Dolan, Maura and Khouri, Andrew. "California's top court makes it more difficult for employers to classify workers as independent contractors." Los Angles Times, April 30, 2018.