This week, the California Supreme Court delivered a ruling that will make it much more difficult for employers in the state to classify their employees as independent contractors. While this decision was mainly framed around issues that arose with the surge in the gig economy, it could have far-reaching implications for every industry that makes use of independent contractors, including the pool and spa industry.
In the unanimous ruling, the court stated that in order to classify a worker as an independent contractor, a business must prove the following to be true: they perform work that is not related to the employer’s main business; that they are neither directed nor controlled by the employer; and that they regularly engage in “an independently established trade, occupation or business.” Additionally, a worker can only be classified as an independent contractor if “the worker is the type of traditional independent contractor – such as an independent plumber or electrician.” Businesses that do not follow these rules and misclassify their workers will face fines.
The practice of classifying workers as independent contractors instead of employees has risen sharply in recent years, driven in large part by gig economy businesses such as Uber, Lyft, and Task Rabbit. These businesses have repeatedly argued that the people who work for them do not meet the classifications of an employee, as they work unscheduled hours not dictated by the company and do not have any management or direction from the business. However workers in the gig economy believe that these companies are abusing the independent contractor classification in order to deny them benefits and protections that are granted to employees. This court ruling will dramatically shift the employment practices of many major tech and gig economy businesses, and spread throughout the rest of the business world in California.
In the examples given by the court, a plumber who is hired temporarily by a retail business to repair a leak would be classified as an independent contractor because they are not performing work that is part of the store’s usual business. But, a seamstress who works at home to make clothing with patterns and materials supplied by a company that sells them would not. This tightening of the definition of independent contractor shifts the responsibility of determination onto the business, but also provides a much clearer set of rules.
The previous standard that only covered how much control a business had over the employee was something of a legal grey area that left a great deal of room for interpretation, while the new standard does not. Some have also speculated that this ruling indicates a trend towards the expansion of worker rights and protections at the state level, as California has followed Massachusetts and New Jersey in the restriction of the independent contractor classification.
While it is not yet known how dramatically this ruling will shift the business landscape in California, employers should be aware that they are on the hook for the proper classification of their workers. Stay tuned for further updates.