New Court Ruling: Contractor vs. Employee Definitions

Earlier this year, the California Supreme Court clarified rules around who is a contractor and who an employee. The good news is that the court did in fact make the situation clearer. The bad news is that for some who were operating in the grey areas of the old rules, that territory shrunk substantially and they will want to review their classifications.

The ruling found that workers are assumed to be employees unless three factors can be proven

The “ABC Test” permits workers to be classified as independent contractors only if the hiring organization demonstrates that the worker in question satisfies all three of the following conditions:

    1. (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 the work and in fact;
    1. (B) That the worker performs work that is outside the usual course of the hiring entity’s business; and,
    1. (C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

For most businesses, this is simply a clarification that narrows the grey area. Just make sure you’re still classifying your workers correctly. However, for some, such as Beauty Shops and Salons, it could present a major departure from being in the business of renting space to contractors to becoming the employer of those workers.

For assistance in figuring this out, call Sequoia Personnel Services at (707) 445-9641.