Finance News & Insights

CA sets new bar for determining worker classification: Is your state next?

In California, an individual will be considered an employee until proven an independent contractor (IC).
That’s the new assumption employers in California will have to be working under, thanks to
a surprising new state supreme court ruling.

And you don’t have to be located in the Golden State to take notice. Here’s the skinny.

A new presumption

The California Supreme Court adopted a new test to determine whether an employee is an independent contractor.

The “ABC Test” sets out three criteria that will allow an employee to be classified as an IC.

And while the test itself didn’t introduce anything so revolutionary (usual issues of control and independence appear), the court dropped one bombshell condition: A person is considered to be an employee unless all three criteria are met.

This marks the first time a state has started with a presumption of employee status that it will be on employers to disprove.

And most likely it won’t be the last.

With the explosion in the gig economy (40% of U.S. workers will be ICs by 2020), states and the feds won’t leave all those tax dollars on the table.

Cite: Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, No. S222732.

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