California Assembly Bill 5 (commonly referred to as the “Gog-work law”) significantly altered the employee/independent contractor analysis in Workers’ Compensation effective January 1, 2020. The Bill added Section 2750.3 to the Labor Code, which codifies the “ABC test” from Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903 [232 Cal.Rptr.3d 1, 416 P.3d 1]. That test case outlined the ABC test as:
“The ABC test 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.” (Dynamex at 955-956)
To show an individual is an independent contractor, the Defendant must prove all three elements on the test. A failure to meet any of the three prongs means the individual is an employee for workers’ compensation purposes. This differed from the eight factors of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543, 769 P.2d 399], for analyzing whether an individual was an employee or independent contractor. The Borello analysis was the standard for evaluating the independent contractor issue in California workers’ compensation before January 1, 2020. It is important to note that the holding in Dynamex was to be very narrowly applied:
“The issue in this case relates to the resolution of the employee or independent contractor question in one specific context. Here we must decide what standard applies, under California law, in determining whether workers should be classified as employees or as independent contractors for purposes of California wage orders….” (Dynamex at 913 [Italics in original]).
Because of this narrow application of the “ABC test,” the WCAB has previously rejected Dynamex and instead relied on Borello when considering whether someone is an independent contractor or employee. (See for example the Opinion and Decision After Reconsideration in Clifford Moorhouse v. Alisal Guest Ranch (August 28, 2019, ADJ11676994); Dennis Gray v. Pathway Group Incorporated, et al. (August 12, 2019, ADJ10520702); Leamon Perkins v. Don L. Know; DLK Capital Inc. (October 23, 2018, ADJ10183569); Juan Gonzalez (Deceased) v. South Green Transportation (October 8, 2018, ADJ9763181)).
The newly enacted Labor Code §2750.3 does not change the fact that it is Defendant’s burden to show that the applicant in a case was an independent contractor. Subdivision (b) provides exemptions to the application of the Dynamex ABC test for certain professions (doctors, lawyers, architects, and others). For these exceptions, and where the court determines that the “ABC test” is not applicable, it is to revert to the Borello analysis.
The effects of AB5 and Labor Code §2750.3 may not be known for some time. Just before the AB5 was to go into effect, a Federal Court Judge temporarily exempted truck drivers from its effects. As the WCAB has repeatedly rejected the Dynamex “ABC test” it will be interesting to see how it is interpreted and applied now that it is the law in workers’ compensation cases.