Labor Code 12750.3 Takes Effect On January 1, 2020

“Under the ABC test, a worker is presumed to be an employee, unless the hiring entity establishes each of the following:

“(A) that the worker is free from the control and direction of the hiring entity 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 the work performed.” (Dynamex, supra, 4 Cal.5th at p. 957.)”

Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558, 569.
A plumber hired by a retail store would not be considered an employee; by contrast, a cake decorator servicing a bakery for custom cakes, or an at-home seamstress sewing dresses from patterns supplied by a clothing manufacturer, would. (Id. at pp. 959–960.) Garcia, supra, 28 Cal.App.5th 558, 569-570.

Because “a hiring entity’s failure to satisfy any one of the three parts itself establishes that the worker should be treated as an employee for purposes of the wage order, a court is free to consider the separate parts of the ABC standard in whatever order it chooses.” (Dynamex, supra, 4 Cal.5th at p. 963.) Garcia v. Border Transportation Group, LLC, supra, 28 Cal.App.5th 558, 569.

Dynamex applies to wage order claims. Dynamex did not purport to replace the Borello standard in every instance where a worker must be classified as either an independent contractor or an employee for purposes of enforcing California’s labor protections. Garcia v. Border Transportation Group, LLC, supra, 28 Cal.App.5th 558, 570.
“The [Dynamex] court cites with approval a Utah case that explained, “‘the appropriate inquiry under part (C) is whether the person engaged in covered employment actually has such an independent business, occupation, or profession, not whether he or she could have one.’” (Dynamex, supra, 4 Cal.5th at p. 962, fn. 30, quoting McGuire v. Department of Employment Security (Utah Ct.App. 1989) 768 P.2d 985, 988. .)” Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558, 573. the third prong, it is not enough to show that the individuals are free to engage in similar activities for others or work as employees for others.” Garcia, supra, at 573.

New Labor Code 2750.3

The ABC test has been codified in the new Labor Code § 2750.3 which is effective January 1, 2020. Labor Code § 2750.3(a) states, inter alia:
“(1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

New Labor Code 2750.3 also lists occupations that are exempt.

“(b) Subdivision (a) and the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), do not apply to the following occupations as defined in the paragraphs below, and instead, the determination of employee or independent contractor status for individuals in those occupations shall be governed by Borello.

(1) A person or organization who is licensed by the Department of Insurance pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), or Chapter 8
(commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.

(2) A physician and surgeon, dentist, podiatrist, psychologist, or veterinarian licensed by the State of California pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, performing professional or medical services provided to or by a health care entity, including an entity organized as a sole proprietorship, partnership, or professional corporation as defined in Section

(3) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.

4) A securities broker-dealer or investment adviser or their agents and representatives that are registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority or licensed by the State of California under Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Division 1 of Part 3 of Title 4 of the Corporations Code.

(5) A direct sales salesperson as described in Section 650 of the Unemployment Insurance Code, so long as the conditions for exclusion from employment under that section are met.

(6) A commercial fisherman working on an American vessel as defined in subparagraph (A) below.
….
c)
(1) Subdivision (a) and the holding in Dynamex do not apply to a contract for “professional services” as defined below, and instead the determination of whether the individual is an employee or independent contractor shall be governed by Borello if the hiring entity demonstrates that all of the following factors are satisfied:

(A) The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this subdivision prohibits an individual from choosing to perform services at the location of the hiring entity.

(B) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.

(C) The individual has the ability to set or negotiate their own rates for the services performed.

(D) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.

(E) The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.

(F) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

(2) For purposes of this subdivision:
(B) “Professional services” means services that meet any of the following:

(ix) Services provided by a still photographer or photojournalist who do not license content submissions to the putative employer more than 35 times per year….. For purposes of this clause a “submission” is one or more items or forms of content produced by a still photographer or photojournalist that: (I) pertains to a specific event or specific subject; (II) is provided for in a contract that defines the scope of the work; and (III) is accepted by and licensed to the publication or stock photography company and published or posted. Nothing in this section shall prevent a photographer or artist from displaying their work product for sale.”

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