California Supreme Court Determines Dynamex Applies Retroactively
As many of you know, the California Supreme Court decided the Dynamex case in April of 2018. That case determined that the “ABC test” controlled whether a worker was properly classified as an employee or independent contractor. To meet the test, the employer must prove that the worker 1.) is free from the hiring entity’s control and direction; 2.) the worker performs work that is outside the usual course of the hiring entity’s business; and 3.) the worker is customarily engaged in an independently established trade or business. The second element has been a struggle for businesses…to say the least.
One outstanding issue after the Dynamex decision is whether it applies retroactively. This is a big issue because wage claims can have a 4-year statute of limitations. If the case applies retroactively, the exposure to companies increases dramatically. Unfortunately, the California Supreme Court decided yesterday that Dynamex does apply retroactively.
What is the lesson learned for each of you? First, work with HR or your lawyer to ensure that all of your independent contractors are properly classified. Second, review your independent contractor agreements to ensure they are drafted in a way that is as protective of you as possible. As always, we’re here to help.