From Dynamex to Assembly Bill 5 to Labor Code Section 2750.3

By Corey Hanrahan

In April 2018, with the decision in Dynamex Operations West Inc. v. Sup. Ct. (2018) 4 Cal.5th 903, the Supreme Court of California stood up for employee rights and tightened the requirements that must be met for employers in California to legally classify workers as independent contractors. The proper classification is important, because workers who are legally classified as independent contractors are stripped of protections afforded by the California Labor Code. 

“…workers who are legally classified as independent contractors are stripped of protections afforded by the California Labor Code

The Dynamex decision adopted a three-part test, called the “ABC” test, to determine whether a workers could be classified as an independent contractor. Arguably, the ABC test simplified the previous cumbersome 11-point standard set in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d. 341. California Assembly Bill 5 codifies the Supreme Court of California’s holding in Dynamex as Labor Code seection 2750.3, taking effect in January 2020. 

Under the anticipated Labor Code section 2750.3, pursuant to the holding in Dynamex, the employer must overcome the longstanding presumption that a worker is an employee, to show that the workers is an independent contractor, by proving all of the following conditions are met: 

  • the worker is free from the control and direction of the hiring entity in connection with the performance of the work, but under the contract for the performance of such work and in fact; 
  • the worker performs work that is outside the usual course of the hiring entity’s business; and
  • the workers is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. 
 
Assembly Bill 5 does include a list of professional exemptions, though, like: doctors, dentists, psychologists, insurance agents, stockbrokers, lawyers, accountants, engineers, direct sellers, real estate agents, hairstylists, commercial fishermen, travel agents and graphic designers.