On April 30, 2018, the California Supreme Court issued its highly anticipated opinion in Dynamex Operations West, Inc. v. Superior Court, clarifying the standard that applies to determine whether a worker is properly classified as an independent contractor for purposes of the Industrial Welfare Commission (IWC) wage orders.1 Dynamex rejects application of the multi-factor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations,2 and instead adopts a three-part “ABC test” for evaluating whether a worker is an independent contractor or an employee covered by the wage orders. Unless the hiring company establishes all three requirements of the ABC test, the worker is an employee.

The first requirement of Dynamex’s ABC test (that the worker must be free from the hiring company’s control and direction in connection with the performance of the work, both under the contract and in fact) aligns with the common law “right to control” standard and is not a novel concept. However, the second requirement (that the worker must perform work that is outside the company’s business) and the third requirement (that the worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work being performed for the company) will make it more difficult for businesses to classify workers as independent contractors in California.