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On September 18, California Governor Newsom signed
Assembly Bill No. 5 into law. The law expands the use of
the “ABC test” to determine if workers in California are
employees or independent contractors.
According to the new law a worker is an employee and not an
independent contractor if they perform work that require a
license (for themselves or their employer), (under the
Business & Professional Code Section 7000, et seq).
The new law codifies a ruling by the California Supreme
Court (Dynamex Ops. West, Inc. v. Superior Ct.), which held
that a worker will be considered an employee of the “hiring
entity” for purposes of the Wage Orders unless the “hiring
entity” can establish all three of the following factors:
1.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
2. The worker performs work that is outside the usual course
of the hiring entity’s business
3.The worker is customarily engaged in an independently
established trade, occupation, or business.
A written contract agreement does not definitively establish
an independent contractor relationship.
The fact the worker is issued a 1099 form rather than a W-2
form does not definitively establish an independent
contractor relationship.
The most significant factor that an employer should
considered is whether they have control or the right to
control the worker both as to the work done and the manner
and means in which it is performed.
Additional factors that may be considered depending on the
issue involved are:
1. Whether the person performing services is engaged in an
occupation or business distinct from that of the principal;
2. Whether the work is a part of the regular business of the
principal or alleged employer;
3. Whether the principal or the worker supplies the
instrumentalities, tools, and the place for the person doing
the work;
4. The alleged employee's investment in the equipment or
materials required by his or her task or his or her
employment of helpers;
5. Whether the service rendered requires a special skill;
6. 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;
7. The alleged employee's opportunity for profit or loss
depending on his or her managerial skill;
8. The length of time for which the services are to be
performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job;
and
11. Whether or not the parties believe they are creating an
employer-employee relationship may have some bearing on the
question but is not determinative since this is a question
of law based on objective tests.
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