The National Federation of Independent Business’ Small Business Legal Center is asking a federal court to limit the reach [1] of the California Supreme Court’s independent contractor classification ruling, saying the new so-called “ABC” independent contractor classification standard should not be applied retroactively.
The ABC test emerged from a case involving delivery drivers claiming they were misclassified (Dynamex Operations West Inc. v. The Superior Court of Los Angeles County). The California Supreme Court abandoned a decades-old “Borello” standard and adopted the ABC test [2] in making its decision. The ABC test presumes all workers to be employees and can only be classified as independent contractors if all these conditions are met:
A. 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 the work and in fact; and
B. The worker performs work that is outside the usual course of the hiring entity’s business; and
C. The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
In a later ruling, a California Superior Court judge ruled the ABC test could be applied retroactively [3], meaning companies that had followed the letter of the pre-ABC ruling law when making worker classification decisions could now be at risk of a misclassification finding.
In a newer decision, Garcia v. Border Transportation Group LLC, an appellate court held whether the Dynamex ABC ruling should be applied to a case depends on whether the case is a wage-order claims case. According to the California Employment Law Report [4], the Dynamex ruling assuming employment status was in relation to a wage-order case. The ruling did not address what standard applies in other cases.
“[Dynamex] should not be imposed retroactively on businesses who had legitimately relied on prior case law,” according to the NFIB. “Indeed, it would be inherently unfair to hold someone accountable to a rule that didn’t exist at the time” an independent contractor relationship was established.