As reported by my colleagues in Proskauer’s California Employment Law Update, the Supreme Court of California established new rules on April 30, 2018 for determining whether a worker is an independent contractor or an employee for purposes of California’s Industrial Welfare Commission (IWC) Wage Orders. The Wage Orders set forth California’s requirements for minimum wage, overtime pay, record keeping, and meal and rest periods, among other wage and hour obligations.

In Dynamex Ops. West, Inc. v. Superior Ct., the California Supreme Court held that a worker will be considered an employee of the “hiring entity” for purposes of the Wage Orders unless the “hiring entity” can establish all three of the following factors:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact
  • The worker performs work that is outside the usual course of the hiring entity’s business
  • The worker is customarily engaged in an independently established trade, occupation, or business

The “hiring entity’s” failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an employee for purposes of the Wage Orders.

The new standard is a significant departure from tests that place heavier significance on control, economic reality, or the balancing of multiple factors (none of which are singularly determinative of employment status).