This Friday’s Five is a video (see video below) that reviews the ABC test for independent contractors as set forth in the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court, (2018) 4 Cal.5th 903. The five issues I discuss in the video include:
1) Part A of the test requires 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; and
2) Part B of the test requires that the worker performs work that is outside the usual course of the hiring entity’s business; and
3) Part C of the test requires that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
4) The contractor must actually be in business for themselves.
The court in Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558, explained that “Dynamex makes clear that the question in part C is not whether [Border Transportation] prohibited or prevented [plaintiff] from engaging in an independently established business.” Instead, the analysis is if the plaintiff “independently has made the decision to go into business for himself or herself” and “generally takes the usual steps to establish and promote his or her independent business – for example, through incorporation, licensure, advertisements, routine offerings to provide services of the independent business to the public or to a number of potential customers, and the like.” Id. at 572-573.
5) The Dynamex ABC test only applies to wage-order claims, and the Borello test applies to all other claims.
The court in Border Transportation explained:
[Dynamex] did not reject Borello, which articulated a multifactor test for determining employment status under the Worker’s Compensation Act. Nor did it address the appellate court’s ruling that “insofar as the causes of action in the complaint . . . are not governed by the wage order” and predicated solely on the Labor Code, “the Borello standard is the applicable standard for determining whether a worker is properly considered an employee or an independent contractor.”
The Borello Test
So employers not only have to comply with the ABC test, they also have to comply with the factors set forth in Borello for all non-wage order labor code issues. The “most significant consideration” is the putative employer’s “right to control work details.” S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations (Borello), (1989) 48 Cal. 3d 341, 350. Recently, the California Supreme Court noted that under the right-of-control test, it is “not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Ayala v. Antelope Valley Newspapers, Inc., (2014) 59 Cal. 4th 522 at 533.
The second set of factors that the court will look at under the Borello test are as follows:
(a) whether the one performing services is engaged in a distinct occupation or business;
(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
(c) the skill required in the particular occupation;
(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
(e) the length of time for which the services are to be performed;
(f) the method of payment, whether by the time or by the job;
(g) whether or not the work is a part of the regular business of the principal; and
(h) whether or not the parties believe they are creating the relationship of employer-employee.
Finally, the Borello test has five additional factors borrowed from the Fair Labor Standards Act (FLSA) in making a determination of a worker’s classification:
(i) the alleged employee’s opportunity for profit or loss depending on his managerial skill;
(j) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
(k) whether the service rendered requires a special skill;
(l) the degree of permanence of the working relationship; and
(m) whether the service rendered is an integral part of the alleged employer’s business.