California Supreme Court Ruling Significantly Limits Independent Contractor Classification

California Supreme Court Ruling Significantly Limits Independent Contractor Classification

The California Supreme Court has established new criteria for classifying workers as Independent contractors.   In Dynamex Operations West, Inc. v. Superior Court, the Court rejected the previous multi-factor test and instead issued a rigid 3-factor test, called the “ABC” test.

Under the ABC test, each of the following three factors must be met in order to classify a worker as an independent contractor:

  1. The worker must be free from the control and direction of the hiring company in performing the work.
  2. The work must take place outside the usual course of the business of the hiring company’s business.
  3. The worker is customarily engaged in an independent established trade, occupation or business.

This ruling will no doubt have a significant impact on gig companies in the Bay Area (Uber, Lyft, and DoorDash, etc.), that rely heavily on independent contractors.

Click on the following links for more info:

https://www.forbes.com/sites/tonymarks/2018/05/29/the-california-supreme-court-deals-a-blow-to-independent-contractors/#43aa2cde70a1

https://www.sfchronicle.com/business/article/Gig-economy-faces-shakeup-after-California-high-12892622.php

http://www.courts.ca.gov/opinions/documents/S222732.PDF

By |June 6th, 2018|Categories: Accounting & Bookkeeping, Announcements, Business Operations, Business Tax, Individual Tax, IRS, Real Estate, Retirement Planning|Comments Off on California Supreme Court Ruling Significantly Limits Independent Contractor Classification

About the Author:

Mimi Lee is a Manager in our Novato office.