State Assemblymember Lorena Gonzalez, elected from here in San Diego, has recently introduced a bill — known as AB 5 — that would convert the Dynamex decision into statutory law. See news report here. As we have discussed on this blog, back in April 2018, the California Supreme Court upended years of employment law with respect to how workers are classified as “employees” as opposed to “independent contractors.” The opinion was handed down in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (Cal. Supreme Court 2018). Under the old test, it was somewhat easy to hire workers as independent contractors as long as an employer satisfied a many-factor standard. Among the more important of the factors was the “control factor.” When an employer exercised little or no control over a worker’s work — such as the timing, pace, location, use of specific tools, etc. — then, the employer could probably safely classify the worker as an “independent contractor.”

However, that changed dramatically under the Dynamex test. Now, in addition to showing lack of control, an employer must also show both that the worker performs work that is outside the usual and normal type of work done by the employer and that the worker is engaged in what is customarily considered an independent trade or occupation. All three parts of the Dynamex test must be satisfied to classify a worker as an “independent contractor.” As an example, if a law firm — engaged in providing legal services — hires a plumber to fix some leaky pipes, that plumber can be classified as an independent contractor (assuming the law firm does not exercise too much control over what the plumber does). Fixing leaky pipes is outside of the normal work done by a law firm and plumbers are generally considered to be engaged in their own independent trade. However, under Dynamex, a law firm cannot hire a lawyer to review documents as an independent contractor even if the lawyer does all the work on his/her own time, at his/her own location, etc. Since reviewing documents is among the many types of legal services provided by law firms, the Dynamex test will not be met. The new lawyer hired to review documents will have to be classified as an “employee.”

Naturally, the Dynamex decision has been controversial. Gig economy workers like Lyft and Uber drivers were happy since they are likely to be “employees” now. As such, they would be entitled to overtime, leave and vacation time, workers compensation benefits, and other labor benefits. But not every worker is happy about the decision. See news report here. Some workers enjoyed the freedom from control even if they were engaged in the core work of the business that hired them. Under Dynamex, it is now nearly impossible to classify workers as “independent contractors” if they are doing work that is the “core business” of the employer. As such, employers now have no incentive to exercise little or no control over their workers. If the workers are “employees” now under Dynamex, then these “employees” will have to abide by the rules and procedures applicable to all employees. This has removed a tremendous amount of freedom formerly given to so-called gig workers.

As noted, Assemblymember Gonzalez has introduced a bill in the State Assembly to make Dynamex part of the California Labor Code. Her bill would exempt certain types of workers, such as licensed broker-dealers and investment advisers. All other workers would be subject to the Dynamex test. We here at San Diego Corporate Law will continue to provide updates on the evolving law under Dynamex.

You may voice your opinion of Lorena Gonzalez’s codification of Dynamex here.

Contact San Diego Corporate Law

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard has been named as “Best of the Bar” by the San Diego Business Journal for the last four years. Mr. Leonard has extensive experience in drafting employee policies, employee handbooks, employment contracts, and all other contracts and agreements necessary for running your business. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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