Noting “the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors” as opposed to employees who are covered by state wage and hour regulations, and saying that state wage orders are “intended to enable [workers] to provide at least minimally for themselves and their families and to accord them a modicum of dignity and self-respect,” the Supreme Court in Dynamex Operations West, Inc. v. Superior Court today limits employers’ rights to call workers independent contractors.  [Disclosure:  Horvitz & Levy filed amicus curiae briefs (here, here, and here) in this case.]

The court’s unanimous, 80-page opinion by Chief Justice Tani Cantil-Sakauye recognizes what it calls the well-documented “difficulty that courts in all jurisdictions have experienced in devising an acceptable general test or standard that properly distinguishes employees from independent contractors.”  It then follows a formula that has been adopted by some other jurisdictions and that is broader than the federal standard.  The test is one that “presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions:  (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (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 that involved in the work performed.”

Bob Egelko reports in the San Francisco Chronicle that the court’s decision “could help thousands of drivers for ride-hailing companies like Uber and Lyft, as well as other gig economy workers.”

The court affirms the Second District, Division Seven, Court of Appeal.