The Independent Contractor and Workers Compensation in California

What happens when someone is injured at work but has been designated as an “independent contractor” by their employer? In these situations, the employer will deny liability because it is claimed that worker was not an employee, but rather an independent contractor. This tactic is frequently used by employers to evade responsibility for work related injuries.

The general rule is that any person rendering a service for another, other than an independent contractor, or unless expressly excluded herein, is presumed to be an employee. California Labor Code §3357.

When an injured worker comes forward with evidence of having provided services for an employer, the burden then shifts to the employer to establish that an employee claiming injury was actually an independent contractor. California Labor Code §5705(a). A dispute then arises when an injured worker claims Workers Compensation benefits, but is then denied when the employer claims they were an “independent contractor”.

When determining whether an employer possess sufficient control over the details of the work such that the worker will be considered an employee rather than an independent contractor, the courts follow the “right of control” test, under which it is the right of control, not the actual exercise of control, that may indicate the status of employment. S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341; 54 CCC 80.

These factors include the right of the employer to discharge the worker, the length of time in which the services are performed, method of payment, and whether the parties believe they are creating the relationship of employer-employee.

These factors were further defined by case law in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. The Borello test factors included:

1.   Whether the person performing the services is engaged in a distinct occupation.

2.   Whether the kind of work done is performed under the direction of the principal or by a specialist without supervision.

3.   The skills required in the particular occupation.

4.   Whether the principal or the worker supplies the instrumentalities, the tools, and the place or work for the person performing the services.

5.   The length of time for which the services are to be performed.

6.   The method of payment whether by time of the job.

7.   Whether the work is part of the principal’s regular business.

8.   Whether the parties believe they have created an employment relationship.

 

In 2018, the California Supreme Court addressed the independent contractor issue in the case of Dynamex Operations West, Inc. In this case the California Supreme Court, in rejecting the Borello analysis, established an “ABC test”.

 Under the ABC test, a worker will be deemed an employee for wage order purposes, unless the presumed employer proves:

(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;

(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.

Each of these requirements need to be met in order for the presumption that a worker is an employee to be rebutted and to be classified as an independent contractor.

Scope of the Ruling

The ruling in Dynamex applied to a wage and hour dispute, not to a Workers Compensation claim. Accordingly, Dynamex would not be applicable in claims for Workers Compensation benefits, at this time.

Dynamex and Workers Compensation

On December 3, 2018 Assembly Bill 5 was introduced by Assemblywoman Lorena Gonzalez. This bill would apply the Dynamex “ABC” test to determine whether a worker was an employee or independent contractor for all provisions of the Labor Code including Workers Compensation. (This bill would also apply to the Unemployment Insurance Code.)

This bill was amended as recently as May 1, 2019 and is still pending in the State Assembly. Should this bill become law it will simplify the independent contractor analysis and by expanding the definition of an “employee”, also expand the categories of individuals entitled to receive benefits.

Because of the issues involving employment relationships, it is important for workers claiming Workers Compensation benefits to be able to clearly describe the degree of control a hiring entity has over them, including the times and locations to be worked, as well the degree of direction given in the performance of their duties.