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California Supreme Court Considering New Test for Employment — Chicago’s No. 1 Overtime Law Law Firm

Once again, our economy is changing. Just like the industrial revolution brought new opportunities for advancement, the digital economy is also bringing with it new ways for people earn a living – either full time or on the side. While this can bring tremendous opportunity for enterprising workers, companies have taken advantage of the new “gig economy” by classifying their employees as independent contractors, even if they don’t qualify.

While working as an independent contract can come with perks like being able to make your own hours, there are downsides, such as paying your own Social Security and self-employment tax. At the same time, companies using independent contractors don’t have to pay Social Security or employment tax on their independent contractors, although they do sacrifice a certain amount of control over the workers as a result, and they usually pay a little more by the hour, day or project.

But lately it seems like companies want to have their cake and eat it, too. Lawsuit after lawsuit has been filed against major companies for allegedly misclassifying their workers as independent contractors, even when they allegedly don’t meet all the requirements. Such a situation puts workers at a significant disadvantage when they have to bear all the financial burdens of being an independent contractor, without any of the perks.

The California Supreme Court has recently agreed to hear a case involving such allegations against Dynamex Operations. In doing so, the court may decide to reconsider California’s previous definition of “employee” and the Court may decide on a new test to determine whether a worker is an employee or an independent contractor. Since 1989, courts have been using the Borello test, but that might not be enough to handle the needs of workers almost 30 years later.

Dynamex insisted on maintaining the Borello test and warned that coming up with a new system to define “employment” may damage California’s gig economy, which is currently booming.

By contrast, Justice Kruger suggested it might make more sense for California to update its employment definition in order to keep up with the times. She pointed to the ABC test, which has already been put in place in jurisdictions on the east coast. The ABC test uses a three-pronged approach which requires a worker to meet all three requirements in order to be considered an independent contractor.

Dynamex and Justice Kruger argued about the potential for a compromise, in which the Borello test would still be applied to some aspects of labor law, while the ABC test would be applied to others, but Dynamex pointed out that such a measure would be impractical and too confusing for employers.

Workers who have been working as independent contractors responded, saying that, as it is now, independent contractors are forced to work hard without receiving any of the benefits offered by California’s Labor Code. The workers argued in favor of a broader definition of “employment” to protect workers from exploitation by large companies.

Justice Liu remained unconvinced. He pointed to Amazon and the difficulties the court would have in determining whether drivers delivering Amazon goods were considered employees of Amazon or independent contractors. He successfully conveyed the complicated nature of the situation and gave the other justices pause when considering applying a broader definition of “employment.” Dynamex built off that point to continue arguing that a broader definition of “employment” would not necessarily be a good thing for anyone.The Evanston overtime lawyers at the Chicago Overtime Law Center are investigating unpaid overtime claims against large retail chains such as Petsmart, OfficeMax, Staples, Smart & Final, Apple, Walgreen’s, CVS, Urban Outfitters, GAP, Abercrombie & Fitch, Limited, Forever 21, Macy’s, Target, JC Penney’s, Lowes, Burlington Coat Factory, Marshalls, TJ Max, Victoria’s Secret, Nieman Marcus, Saks Fifth Avenue, Best Buy, Home Depot, Apple, Best Buy, Sears, K Mart, J.C Penney, Walmart, Costco, PetSmart, REI, Office Depot and other retail chains for misclassifying employees as managers, erasing or altering time sheets or time records, pressuring workers not to report or record overtime, failing to pay for time spent on security checks, and otherwise failing to pay workers for overtime and other wages. If you are the victim this practice call us at one of our offices near St. Charles and Elmhurst at (312) 869-4095 or contact us online.