California High Court Ruling Limits Independent Contractor Classification

In a big win for labor advocates, the California Supreme Court on Monday limited businesses from classifying workers as independent contractors who can’t receive key employment protections.

Experts expect the ruling to expand the number of workers eligible for minimum wage, rest breaks and other benefits under a state wage standard.

The court unanimously adopted a broad definition for those who qualify as employees in a lawsuit that drivers brought against package delivery company Dynamex Operations West Inc.

Attorneys involved in the case said the ruling will affect other workers listed as independent contractors in the so-called sharing economy, including drivers in ride-hailing companies like Uber and Lyft.

An attorney for Dynamex, Robert Hulteng, declined to comment.

Michael Rubin, who represented labor unions that argued on behalf of Dynamex drivers, said the court adopted “the most worker protective standard available.”

Massachusetts and New Jersey have similar standards, he said.

“It makes it far more likely than before that in California, the Ubers and Lyfts will have to begin treating the workers as employees,” Rubin said.

But he cautioned that cases would have to be decided on an individual basis.

To list workers as independent contractors, businesses have to show they don’t control and direct the work, that the duties fall outside what the company normally does and the worker is “customarily engaged in an independently established trade, occupation or business,” the California Supreme Court said.

That independent trade also must encompass the same type of work performed for the business.

The previous standard to determine whether workers were employees or independent contractors focused primarily on whether the business controlled how the work was performed.

As an example, the court said a plumber hired by a retail store to repair a bathroom leak is not performing work that is part of the store’s usual business.

But when a bakery hires cake decorators, “the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees,” Chief Justice Tani Cantil-Sakauye wrote.