I already wrote a blog on this one. It’s such a big issue I’m going to write another (still short and sweet I promise).
I went to a legal review at K&L Gates put on by OCTANe regarding the Dynamex Operations West, Inc. v. Superior Court and its definition of what a true 1099/Independent Contractor is. Going into the review I already knew the ramifications of the new legal guideline but it seemed too obvious. My question: If the worker does what the company does then they’re employees, right?
Before I go into what I discovered there let’s review the three prong “ABC” test that is now the NEW legal standard in classifying a 1099 in CA. If the Independent Contractor does not meet any of these requirements, they should be classified as an employee:
the worker is free from the control and direction of the hirer in connection with the performance of the work, both 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 worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
BTW...the attorneys said do “B” and “C” first then A.
The biggest kicker though is “B” and this is why I came to the review because if the worker DOES what the business DOES then the worker should be an employee. So obvious right? Yes. But that’s sooooo crazy for soooo many business out there. It would be detrimental to so many business models. Think of all the typical industries that hire 1099s as an industry standard. Real estate agents, engineers, lawyers, doctors, truck drivers, 1099s in the gig economy and UBER drivers. As we know...there has been a TON of news about UBER in the courts. All these workers...there’s no way they all should be employees. RIGHT?! I wanted a direct answer.
Here’s my obvious question to an attorney at the review...
Confused Me: So I’m a bit confused when you started talking about the “gig economy” (the attorneys were talking tax law, how the new ruling didn’t apply yet and I got my wires in my brain crossed) and UBER. UBER drivers drive for UBER. Under the new test that would make them an employee, right?
Very Nice Attorney: Yes.
Shocked Me: WOW! This is HUGE!
Very Also Shocked/Concerned Attorney: YES! This is a big deal for so many employers!
Me (Keanu Reeves Voice): Whoa.
So imagine this...any 1099 that does what the business does...should now be classified as employees. If you are an engineering firm and you employ 1099 engineers...they should be employees. If you are a trucking company and you employ 1099 drivers...they should be employees. If you are a real estate company and you employ 1099 real estate agents...they should be employees. This is why I went to the review for a direct answer.
This is huge.
If you have 1099s I urge you to review their validity as 1099s. Or call me. We can chat about it and I’m more than happy to do so for free.
If you’d like more information on the new ruling read my first blog on the subject: https://www.linkedin.com/pulse/classifying-your-1099s-ca-just-got-tougher-leilani-e-quiray-sphr/
And if you’d like a wonderfully thorough article on the subject, my friends at Fisher Phillips wrote this: https://www.fisherphillips.com/resources-alerts-contractor-apocalypse-california-supreme-court-adopts-broad
By: LeiLani E. Quiray, Founder and HR Pro @bethechangeHR
Disclaimer: Although I admire attorneys I am not one. If you need legal advice please reach out to your employment attorney or I can
refer you to a stellar one.