In its recent ruling, the California Supreme Court essentially flipped on its head the test for determining independent contractor status by presuming everyone is an employee unless the hiring entity can prove otherwise. The ruling, issued April 30, makes it more difficult for companies to classify workers as independent contractors instead of employees, which could have a major impact on companies such as Postmates, DoorDash and UberEats, which rely on so-called “gig workers” as their delivery drivers.
The court adopted a classification test that presumes workers are employees, not independent contractors, unless the hiring entity can prove the three factors outlined below:
(A) that 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, (B) that the worker performs work that is outside the usual course of the hiring entity’s business, and (C) that the worker is customarily engaged in an independently established trade, occupation, or business, the worker should be considered an employee and the hiring business an employer under the suffer or permit to work standard in wage orders.
“The hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order,” the opinion reads.
With the decision, third-party delivery companies could be required to pay workers’ compensation and unemployment taxes for drivers that had been independent contractors.