California Announced A Dramatic Change in Independent Contractor Law
The California Supreme Court just issued a landmark decision that makes it extremely difficult for businesses to classify individuals as independent contractors. When making a decision about classification, companies previously analyzed the level of control they would exercise over the individual. Under the new test, a person will be considered an independent contractor only if the hiring entity can prove all three of the following:
(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 of the same nature as the work performed.
Because of the “B” prong, companies now cannot have independent contractors perform any work consistent with their normal course of business (i.e. any work they would have an employee perform), even if they do not control how these individuals do their job. Doing so invites an expensive and uphill misclassification lawsuit wherein the court will presume that the individual is an employee and put the tri-part burden on the company to prove otherwise. Landegger Baron Law Group strongly recommends that all companies self-audit for any potential exposure under this new standard and contact our office for any needed guidance during the process.
By: Kristina Kourasis, Esq, and Christopher W. Hughes, Esq