San Francisco, CA (WorkersCompensation.com) – A ruling yesterday in the California Supreme Court could change the way the gig economy works, experts have said.
In the case of Dynamax vs. The Superior Court of Los Angeles County, the Supreme Court rejected a previous test for employment, the Borello test, which used nearly 10 factors to determine whether a worker is an employee, opting instead to follow the ABC test used in Massachusetts and New Jersey that looks at whether or not the worker performs a job that is part of the “usual course” of the company’s business.
Under the ABC standard, the worker is considered an employee unless the employer can prove that the worker is not under its supervision; that the worker does work outside of the employer’s business; and that the worker is “in an independently established trade, occupation or business of the same nature” as the work they do for the employer that is hiring them.
“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 included employee, rather than an excluded independent contractor, for purposes of the wage order,” the court said in its brief.
The case could have huge impacts on the gig economy, where companies like Uber and Lyft, define their drivers as contractors and not employees. As contractors, the drivers are not under the ride share companies’ control, and work independently, saving the companies from having to pay them minimum wage, or provide benefits like unemployment insurance or workers’ compensation coverage.
Kevin Ruf, of Glancy Prongay & Murray, LLP, the attorney for two workers in the case, said the case would have a lasting impact on the “abuse of so-called ‘independent contractor’ status in California.”
“In oral argument, I suggested that many ‘independent contractors’ who work without the basic protections of our employment laws –—are a modern-day serf class,” Ruf said, according to Law 360. “In its introduction, the Supreme Court indicated that the misclassification of employees as independent contractors is a ‘serious problem’ and this decision helps address that problem.”
Uber, when contacted via email by WorkersCompensation.com, declined to comment on the court’s decision.
As previously reported by WorkersCompensation.com, a case brought against GrubHub in California where a worker alleged that he was an employee and not a contractor, found in favor of the business. But it also found that food delivery was a core part of the company’s business in Los Angeles. The company had argued that its main business function was as a marketing company.
Shannon Liss-Riordan, the attorney for the plaintiff in the Grubhub case, told the New York Times that she would seek reconsideration in light of the new ruling.
Experts have said the court’s decision could force companies like Uber and Lyft to follow FLSA standards, which could wreak havoc on their business models. Industry executives has said that classifying drivers and other gig workers as employees costs 20 to 30 percent more than classifying them as contractors. But, the benefits of making them employees could offset the costs.
“It’s a massive thing — definitely a game changer that will force everyone to take a fresh look at the whole issue,” said Richard Meneghello, co-chairman of the gig economy practice group at Fisher Phillips law firm.