Animation Guild

Fall 2018

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16 KEYFRAME WO R K W ISDO M Michael D. Four, Esq. THE FUTURE OF INDEPENDENT CONTRACTORS IN THE STATE Earlier this year, the California Supreme Court issued a decision that significantly increases the number of California workers who must be classified as "employees" rather than "independent contractors." Under California law, employees are owed benefits and protections that do not apply to independent contractors, and so this case shifts the balance in favor of workers who have previously been misclassified as independent contractors. In Dynamex Operations West, Inc. v. Superior Court, the Court held that a new legal test will replace the old standard for determining whether a worker must be classified as an "employee." The Court explained that this new, broader test is appropriate to ensure that workers are protected from the harm of misclassification. It also explained that preventing misclassification is necessary so that scrupulous employers are not subject to competition from unscrupulous companies that unfairly shift costs onto the backs of workers through misclassification. In today's "gig economy," many companies (Uber, for example) have business models that rely on cutting costs by classifying their workers as "independent contractors." These business models often undermine workers' rights and job security, and shift costs onto workers and the public. The Dynamex decision requires businesses to rethink such models, and they face serious legal liability if they fail to correctly classify their employees. THE ABC TEST This case began over a decade ago, shortly after delivery company Dynamex transformed all of its delivery driver employees into independent contractors overnight. One of these drivers filed a class action, claiming that all of these drivers were misclassified, and were still owed the benefits associated with employee status. Following a number of appeals, and after the trial court finally certified the class action to proceed, Dynamex appealed again. The California Supreme Court took the opportunity to develop the broader test for classification of employees. The test is drawn from the test used in several other states, and is known as the "ABC Test." Under the ABC Test, a company that claims that a worker truly is an independent contractor rather than an employee must prove that the worker: • Is free from control and direction by the hiring company in connection with the work, both under the contract and in fact; • Is performing work that is outside of the usual course of the hiring company's business; and • Is engaged in an independently established business of the same nature as the work being performed. Parts A and C are important, but the biggest impact of adoption of the "ABC Test" will likely be under part "B." The requirement that the work performed be outside of the hiring company's usual business means that companies will not be able to provide their core services through independent contractors. To give an example, delivery companies (like Dynamex) will not be able to use independent contractors to provide delivery THE ABC'S OF DYNAMEX "For the time being at least, Dynamex is a step in the right direction in ensuring that workers are not unfairly stripped of legal protections."

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