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California Supreme Court Transforms the Test for Who Is an Employee

news.bloomberglaw.com

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Re: California Supreme Court Transforms the Test for Who Is an Employee

#71

Post by jaggederest »

hardwaresofton wrote: post #34

Here is the new test (the ABC test if you're into unnecessary pet names for things): > If A, B, or C isn’t present, the worker is considered an employee. > A. Freedom from control over how to perform the service > B. Service is outside the business' normal variety or workplace > C. Worker is engaged in independently established role So if any one of those conditions isn't the case, you are an employee under the law.…

The test, as stated in the decision:

(1) the employer neither exercised control over the worker, nor had the ability to exercise control in terms of the completion of the work;

(2) the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise; and

(3) the individual has a profession that will plainly persist despite termination of the challenged relationship.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#72

Post by [deleted] »

rtpg wrote: post #47
CamperBob2 wrote: post #46

Earlier quoted context omitted.

So if any one of those conditions isn't the case, you are an employee under the law. I see people in this thread wondering how it'll affect companies like Uber/Lyft/whatever 'B' is downright apocalyptic for contract developers in all sorts of roles. Sounds like massive judicial overreach to me. If your summary is accurate, I wouldn't expect that particular guideline to survive appeal.

If you are an IT company and all your work is done through contract developers, perhaps you _are_ going against the spirit of the law. Labor law is meant to protect those in the employer employee relationship, and most contractual work explicitly weaken this relationship a lot. So contractual work really shouldn't be the norm in a business. If you can't provide your main business without this set of people, then thos…

[deleted]

Re: California Supreme Court Transforms the Test for Who Is an Employee

#73

Post by Animats »

paulsutter wrote: post #44

The change seems immaterial to me except that it’s much clearer. The article author injects a social justice angle without describing any specific impact. Who is really affected by this? Any concrete examples?

The material part is that it's clearer. That means most such decisions don't require litigation. The result will be that blatant violations of the law get resolved fast.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#74

Post by SilasX »

greglindahl wrote: post #38
cft wrote: post #23

How will this affect the tax? The main difference between a 1099 contractor and a W2 employee is in the payroll and social security/medicare tax requirements. But these tax requirements are federal and this is a CA only decision.

Last I worked on a 1099, the total tax amount was roughly the same, the difference was who paid it.

It doesn’t make a difference if everyone (including the government) agrees on the classification in advance.

It makes a huge difference if you can retroactively change the terms of the original agreement (“because I wasn’t classified right”) and get the other party to have to pay you back for (half of) those taxes.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#75

Post by gnicholas »

hardwaresofton wrote: post #34

Here is the new test (the ABC test if you're into unnecessary pet names for things): > If A, B, or C isn’t present, the worker is considered an employee. > A. Freedom from control over how to perform the service > B. Service is outside the business' normal variety or workplace > C. Worker is engaged in independently established role So if any one of those conditions isn't the case, you are an employee under the law.…

I think A and B present a difficult challenge for Uber/Lyft. Drivers do not have the freedom to control how to perform their services. They do have some leeway in route, but not total leeway. And there are many guidelines they have to abide regarding the condition of their vehicle and treatment of passengers.

Element B is a little less clear, but I think it would be difficult for Uber/Lyft to overcome. Drivers would argue that the normal workplace is actually the streets. Uber/Lyft could of course argue that it's HQ, but given the number of drives on the street and the number of employees at HQ, this is no slam-dunk for the companies.

Background: I am a (former) lawyer who worked on employee/contractor issues in the realm of tax law (which uses different tests than state law).

Re: California Supreme Court Transforms the Test for Who Is an Employee

#76

Post by unholythree »

ajross wrote: post #52
ddingus wrote: post #31

Earlier quoted context omitted.

Honestly, yours is a GREAT read. That's a very solid case for contractors and almost nobody will have a meaningful problem with it. I've done similar things in the CAD / data management space. A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. The…

> A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. Such a contractor would likely meet the new "ABC" standard in the linked article, though. Those aren't the positions that are in danger of being eliminated, it's the "grunt contractor" folks who…

My thoughts exactly. Some people seem to be reading this ruling as though no "tech company" could hire any "tech contractor". However, I read it: if a hypothetical company doesn't for example design databases as their bread and butter they could hire someone else to.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#77

Post by Camillo »

forapurpose wrote: post #41
taurath wrote: post #2

It’s interesting how even within companies a hard set social hierarchy has taken place between employees and contractors. The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects (companies tend to like to hire from full time to full time), worse benefits and generally don’t get most of the perks of being an employee. For coders, is this because they’r…

> The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects ... There was a very interesting NY Times article last fall about that issue. They contrasted janitors at Apple, who work for a contractor and have no prospects for advancement in Apple, and Xerox's janitors in the 1980s who were employees, and one of whom is now Xerox's CTO: https://www.nytime…

You are so wrong I don't know where to start. The percentage of Americans with college degrees has never been higher. For decades, the message from authorities has consistently been to encourage youths to go to college as much as possible, and the number of students has kept increasing beyond all reason. We are well past the point of diminishing returns, and into pure and simple harm, where millions of Americans go into debt to get pointless degree just so they'll be considered for jobs that shouldn't need a degree in the first place. It's a disaster.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#78

Post by jahewson »

bdcravens wrote: post #70
hardwaresofton wrote: post #34

Here is the new test (the ABC test if you're into unnecessary pet names for things): > If A, B, or C isn’t present, the worker is considered an employee. > A. Freedom from control over how to perform the service > B. Service is outside the business' normal variety or workplace > C. Worker is engaged in independently established role So if any one of those conditions isn't the case, you are an employee under the law.…

So a 1099 developer who is required to participate in daily standups will likely qualify as an employee I presume?

I see no reason to think that.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#79

Post by gnicholas »

cft wrote: post #23

How will this affect the tax? The main difference between a 1099 contractor and a W2 employee is in the payroll and social security/medicare tax requirements. But these tax requirements are federal and this is a CA only decision.

Bingo. The IRS uses a different test, so workers could end up as "employees" for the purpose of state law and "contractors" for the purpose of federal tax withholding.

Source: I used to be a tax lawyer.

Re: California Supreme Court Transforms the Test for Who Is an Employee

#80

Post by hardwaresofton »

twblalock wrote: post #67
hardwaresofton wrote: post #54

Earlier quoted context omitted.

I should have posted this earlier, but buried in the bloomberg is the decision: https://www.bloomberglaw.com/public/desktop/document/Hargrov... I honestly am not 100% sure of the ramifications, but I am sure that these companies are going to act in their best interest, and with the current imbalance in the labor market (some might argue that the markets are right where they should be), I'm relatively certain that wil…

Of course companies are going to act in their best interest. But this ruling does not change that, because companies have been acting in their best interest all along. If anything, this makes it easier for contractors to prove they ought to be employees.

Well, you've rehashed what I said -- That was meant to be to all the people wondering how this ruling would affect companies like Uber/Lyft/other gig economy companies.

The answer is it won't affect them, because they'll do what it takes legally to act in their best interest, like they have always done (and have had way more resources than the average worker to do). So nothing will change, outside of a likely reduction in lawsuits for companies most able to navigate the new legal climate.

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