California Supreme Court decision makes it harder for businesses to use independent contractors

In a ruling that sent seismic waves through every California business, the California Supreme Court made it harder Monday for employers to classify their workers as independent contractors.

Nearly every employment sector in the state is struggling to determine what the decision’s implications are for their specific operations.

The ruling was handed down in a class-action lawsuit against Dynamex Operations West Inc. a package and document delivery company. The suit alleged that Dynamex misclassified its delivery drivers as independent contractors rather than employees.

To classify someone as an independent contractor, the court said, businesses must show that the worker is free from the control and direction of the employer; performs work that is outside the hirer’s core business; and customarily engages in “an independently established trade, occupation or business.”

“When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor … there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification,” Chief Justice Tani Cantil-Sakauye wrote for the court.

A worker may be denied the status of employee “only if the worker is the type of traditional independent contractor – such as an independent plumber or electrician – who would not reasonably have been viewed as working in the hiring business,” the court said.

Instead, an independent contractor would be understood to be working “in his or her own independent business,” Cantil-Sakauye wrote.

CNPA staff is still assessing the full implications for newspapers that engage directly with carriers and, more importantly, for those newspapers that use 3rd party distribution models in their home delivery operations.

Staff is working with one of the foremost experts in this area of labor law to analyze the impact of the court’s decision on the newspaper industry. Once the analysis is completed CNPA plans to get it to members ASAP. Publishers may want to speak with their own counsel in the meantime to analyze the decision’s impact on their specific operation.