CA Adopts ABC Test for Independent Contractors

On Monday, April 30, the California Supreme Court issued a landmark [Dynamex Operations West v. Superior Ct., Cal. Sup. Ct., Dkt. No. S222732, 4/30/18] decision basically stating that the “ABC Test” is to be used when determining whether a worker is an employee or independent contractor for purposes of California wage orders. Previous to this latest decision the court case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations, Cal. Sup. Ct., 769 P.2d 399, 3/23/89) was used to determine employee status. In that case the principal test of an employment relationship was whether the person to whom services were rendered has the right to control the manner and means of accomplishing the result desired. Under Dynamex, the Court embraced a standard that presumes all workers are employees instead of contractors and places the burden on classifying an independent contractor under the ABC test.

For a detailed analysis of this case and how you might have to adjust your hiring decisions, I will refer you to the Labor & Employment Law Blog posted by Timothy Kim for the law firm of Sheppard Mullin.

FLSA & Independent Contractors: DOL Provides Handy Tool

The subject of who is an employee and who can be classified as an independent contractor is a hot topic right now.  Both the IRS and the Department of Labor (DOL) are actively auditing employers to locate misclassified employees.  But how do you know if you are doing it correctly, when you classify a worker as an independent contractor?  The IRS has, of course, their 3 factor control tests that you can apply.  They also have the Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Employers can use this form to help themselves determine worker status or even submit it to the IRS and let them make the determination (not usually anyone’s first choice!).  But what about the DOL and the FLSA?  What do they offer to help determine a worker’s classification?

elaws is the main assistance program that helps employers navigate the complexities of the Fair Labor Standards Act requirements.  These interactive web pages answer various questions on things such as calculating overtime and who should be exempt.  Now the DOL has a elaws on Independent Contractors that give some simple but efficient information to help employers determine if the worker should be an employee or not. It explains the background of how the determinations are made as well as the six areas that are investigated to determine the worker’s status. Though a simple one-page elaws it does provide good information for employers.

Categorizing Employees Under the FLSA–Our Latest White Paper

Should a worker be an independent contractor or an employee? Employers grapple with this question everyday.  And most think that it is all based on what the IRS wants under the tax rules.  Do they pass the three factor test on the employee side or the independent contractor side?  Do we offer training? Do we have too much control over them?  These are the questions the IRS asks in making the determination and employers must answer to the IRS’ satisfaction.  But employers must never forget there is another government agency out there that is just as interested in how you categorize a worker and have been since 1938.  It is the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL). Their rules under the Fair Labor Standards Act (FSLA) have been in play for decades.  Sitting quietly through audit after audit.  The WHD has incorporated dozens of states into its fold with its misclassification initiative. Late last summer it issued an “interpretation of these rules” that have been in place for decades. All this to reinforce the idea that they are here and they are auditing.

So what are these rules under the FLSA?  That is what our white paper is about this week.  How to classify a worker as an employee under the FLSA. What are the basic rules, the court rulings and the latest Administrator’s interpretation.  Check out our home page to request a copy this week.


WHD Gives Interpretation of “Who is an Independent Contractor”

The Wage and Hour Division (WHD) of the U.S. Department of Labor has issued an Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors. This Interpretation explains in greater detail how the WHD would use the “Suffer or Permit to Work” standard in identifying employees who are misclassified as independent contractors. In addition, the WHD has discussed the same subject on its July 15, 2015 blog in less legalese but still illuminating.


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