California State Test for ‘Employee’ Status

California Assembly Bill 5 takes the ‘employee classification’ criteria from the court’s decision in Dynamex Operations West v Superior Court of Los Angeles in 2018, and makes it official law for all California employers. Beginning January, 2020 employers will need to look at 3 factors when hiring an individual, to determine if they may be treated as an independent contractor:

  • The individual is performing work outside of the company's control

  • The individual performs work that is outside of the “usual course” of the company’s business

  • The individual has their own established trade or business entity for the work they perform 

Employers should note that the law favors ‘employee’ status, and applies to the Labor Code (Section 2750.3) and the Unemployment Insurance Code (Sections 606.5 and 621). The full text of the bill is available here. Employers with California employees who currently utilize independent contractors should examine these individuals under the newly adopted 3 factor test to ensure they are properly classified.