True to form, California’s ruling in the Dynamex case resulted in some additional challenges when it comes to worker classification. While they spearheaded the changes, the cascading effects of the ruling are being felt in other states, including Washington.
In California, the Borello test was the long-time standard for determining whether a worker is an independent contractor or a W2 employee. The key point in the Borello test was determining whether the employer had a “right to control” how services were performed.
Secondary considerations—such as whether the worker was engaged in a distinct occupation or business, the skill required in the particular occupation, and whether the worker or the hiring entity supplied the tools used to perform the work and the place where the work was performed—also came into play. The case hinged largely on the meaning of the term “employ.”
The key point in the Dynamex case is that it replaced the Borello test with the ABC test. This iteration eliminated some of the gray areas in deciding whether a worker is an employee or not.
According to the ruling, a worker in California is assumed to be a W2 employee and can only be considered an independent contractor if all of the following apply:
- 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
- that the worker performs work that is outside the usual course of the hiring entity’s
- that the worker is customarily engaged in an independently established trade,
occupation, or business of the same nature as the work performed.
This is the narrowest definition of an independent contractor to date and puts more pressure on point “B” than ever before.