The California Supreme Court decision of this year Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018) has strongest influence among the recent precedents on business in California and beyond. Since most of the startups in our state use independent contractors labor especially in project-based work. Arguably, the new standard in Dynamex is limited to “wage and hour” issues only, but businesses might have to apply the test to their workforce in general to avoid risks of court applying to other issues. While some larger startups will probably easily adapt to the new re-classification requirement of their employees and increase in financial burden will be insignificant, smaller businesses and freelancing platforms will likely to be experience increased burden. Many businesses in current on-demand (gig) economy rely on workforce that enjoys applying their skills and manage their own schedules. Companies like Uber, Lyft, small trucking and delivery companies, will probably have to treat their workforce as employees with all the consequences of that, like minimum wage, taxes and payroll.
Dynamex created a new test which is pretty hard to satisfy. “Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that 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 such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiringentity.” Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018)