Dynamex Operations West, Inc. v. Superior Court Supreme Court Decision Explained

In 2004, Dynamex Operations West, Inc. hired a delivery driver, Mendoza, as an independent contractor, not an employee.

This classification allowed Dynamex to save on benefits, taxes, and other labor costs.

The Supreme Court of California ultimately ruled in favor of Mendoza, finding that Dynamex had misclassified him as an independent contractor.

The court's decision was based on a test known as the "ABC test", which was first introduced in a 1989 decision, S.G. Borello & Sons, Inc. v. Department of Industrial Relations.

The California Supreme Court adopted a new "ABC" test in the Dynamex case to distinguish employees from independent contractors. This test has three main parts.

To be considered an independent contractor, a worker must be free from the control and direction of the hirer in connection with the performance of the work, both under the contract and in fact.

The worker's work must be outside the usual course of the hiring entity's business. This means that if the worker is performing work that is typically done by employees of the company, they are likely to be considered an employee.

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The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. This requires the worker to have a separate business or trade that they can offer to the public.

To meet this requirement, the worker's business must take certain steps, such as incorporation, licensure, advertisements, and offering services to the public.

The Dynamex decision applies retroactively, meaning it applies to cases that occurred before the decision was made. This is because the California Supreme Court determined that employers were on notice that a worker's status as an employee or independent contractor might depend on the "suffer or permit to work" prong of a wage order.

Here is a summary of the "ABC" test:

The Dynamex court provided examples of how this test would be applied in different situations. For example, a retail store hiring an outside plumber to repair a leak would not be considered an employee, but a clothing manufacturing company hiring work-at-home seamstresses to make dresses would be considered an employee.

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The Dynamex case has significant implications for California businesses, particularly those that hire workers on a regular basis. The ABC test established in the decision will determine whether a worker is an employee or independent contractor.

Businesses that hire workers to perform tasks that are part of their usual course of business will need to be aware of the potential consequences. If a worker is deemed an employee, the business will be responsible for paying federal Social Security and payroll taxes, unemployment insurance taxes, and state employment taxes.

Hiring businesses will also need to provide workers' compensation insurance and comply with various state and federal statutes and regulations governing wages, hours, and working conditions. This can be a significant financial burden, especially for small businesses.

Here are some examples of how the Dynamex decision may affect businesses:

Businesses that are affected by the Dynamex decision should consider seeking legal representation to ensure compliance with the new standards.

The California Supreme Court made a groundbreaking decision in Dynamex Operations West, Inc. v. Superior Court, which changed the way independent contractors are classified.

In April 2018, the Court held that the "control" test developed in S.G. Borello was not the exclusive standard, and that the definition of "employ" developed in Martinez was applicable.

The Court further clarified that the "suffer or permit to work" definition in Martinez is a term of art, determined by the "ABC" test used in other jurisdictions. This test is crucial in deciding whether a worker is an independent contractor or an employee.

To be considered an independent contractor under the "ABC" test, all three of the following must apply: the individual is not under the direction of the hirer, the individual completes work not designated by the hiring company, and the individual is engaged in an independently established trade.

Here's a breakdown of the "ABC" test criteria: