INDEPENDENT CONTRACTORS – Remember That California Has It’s Own Set of Rules

By May 16, 2019 May 29th, 2019 HR Blog

By Jennifer Jacobus PHRca, SHRM-CP SDEA Director of HR Services

California employers may have read a couple of news releases this week that caused them to scratch their head. 

On Monday, Amazon announced that they were going to help their employees with start-up fees to start their own delivery business and then contract directly with Amazon as their delivery service provider. Amazon announced that they would pay their existing employees up to $10,000 to quit their jobs, using the money to help with start-up fees associated with a new business. Amazon is trying to compete with UPS and FedEx and offer one-day delivery services to Prime Members.

For the program, drivers will wear Amazon-branded uniforms and the vans will sport Amazon Prime logos — but the business will be owned by the entrepreneurs themselves and contracted by Amazon to complete deliveries.

On Wednesday, the NLRB ruled that Uber drivers were in fact contractors and that they are not considered employees. Both the drivers and labor advocates have been fighting this battle with Uber in order to provide the drivers with wage and hour protections, employee benefits and other perks that come with being an employee versus an independent contractor.

Both of these decisions are being made based on guidelines under federal law; California operates under a different umbrella.

A little over a year ago, the California Supreme Court issued their ruling on the Dynamex case which resulted in what many refer to as the “Dynamex Rule” or the “ABC Rule”. The Court held that it is the burden of the hiring entity to establish that a worker is an independent contractor who was not intended to be included within the applicable wage order’s coverage.

To meet this burden, the hiring entity must establish each of the following three factors, commonly known as the “ABC test”:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Based on this April 2018 ruling, the business operations under both Amazon and Uber could be easily challenged in California. California employers are cautioned to heavily rely on the ABC Test when making a determination on worker status and to consult legal if there are questions or areas of grey.

If you have any further questions please call SDEA 858.505.0024 

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