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California Supreme Court Adopts “ABC” Test for Independent Contractor Status Under State Wage Orders

Wednesday, May 9, 2018

(North American Meat Institute)

The California Supreme Court last week adopted an “ABC” test to determine whether a worker is considered an employee or independent contractor under the state’s Wage Orders, which impose obligations on employee working conditions including minimum wages, hours worked and meal and rest breaks. The Court held hiring entities will be required to establish each of three factors (“ABC” test) to prove that an independent contractor relationship, rather than employer relationship, exists: the worker is free from the control and direction of the hirer in connection with the performance of the work; the worker performs work that is outside the usual course of the hiring entity’s business; and the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Previously, courts and the California Department of Industrial Relations, Division of Labor Standards Enforcement, have used the multi-factor test articulated in Borello & Sons, Inc. v. Dep’t of Indus. Relations (1989) 48 Cal. 3d 341, a workers’ compensation case. In that case, the opinion held courts should consider factors such as the potential contractor’s investment in tools, the method of payment, the degree of permanence of the relationship and the parties’ intention regarding the relationship when assessing whether a contracting or employment relationship exists.

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