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CA Supreme Court Rules that New Independent Contractor Test Applies Retroactively

Jan. 21, 2021

On January 14, 2021, the California Supreme Court decided that the recently enacted independent contractor test (also known as the ABC Test), which went into effect on January 1, 2020, applies retroactively. The ABC Test was adopted for determining whether a worker is an employee or independent contractor for purposes of the obligations imposed by California’s wage orders. The ABC Test makes it more difficult for an employer to legally classify a worker as an independent contractor. The three-prong test requires the employer to prove that the worker is: (A) free from the control and direction of the hiring entity; (B) performing work outside of the usual course of the hiring entity’s business; and (C) customarily engaged in an independently established trade of the same nature as the work performed.

Summary: Employees can now hold employers liable for being misclassified as independent contractors under the ABC Test for violations that occurred prior to January 1, 2020. However, it's important to keep in mind the applicable statute of limitations.