SAN FRANCISCO, CA, May 17th, 2018 — IIABCal will host a member-only webinar in two weeks to explain what broker-agents need to know right away about Dynamex--the sweeping decision of the California Supreme Court that will force most California employers to stop hiring independent contractors, and reclassify existing contractors into employees.
“Every insurance agency and brokerage in California needs to immediately understand that almost all producers may now have to be treated as employees, rather than independent contractors,” said Steve Young, IIABCal general counsel. “It doesn’t matter what current contracts may state, and it doesn’t even matter what the agency and producer may desire. As a matter of law, the ground rules have been dramatically rewritten by this decision.”
At 10 am on Thursday, May 31, IIABCal members will have the opportunity to hear from John Baum, Esq., a senior partner at Hirschfeld Kraemer, LLP, a renowned labor and employment law firm, on what agency and brokerage owners need to implement in their own businesses—and how they should be advising their clients and policyholders.
Register here for the webinar.The Webinar will also feature copies of a variety of model employment-related agreements for agencies and brokerages that the firm has drafted.
It is very difficult to understate how important and far-reaching the Dynamex decision is likely to be for California employers, Young said.
Historically, administrative agencies and courts have developed a variety of rules for distinguishing employees from independent contractors. While the exact scope of those rules varied from one context to the next, all were focused at their core on the extent to which an employer did or could “control” the actions of the worker; the greater the level of control, the more likely the worker was to be regarded as an employee.
In Dynamex, the Court effectively threw out the old rules and adopted an “ABC test.” To qualify as an independent contractor, an employer must now prove all of the following:
A. That the worker is free from the control and direction of the hirer in the performance of the work; and
B. That the worker performs work 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 being performed for the hiring entity.
The case was brought by workers against Dynamex Operations West, Inc. a nationwide package and document delivery company, alleging that Dynamex had misclassified its delivery drivers as independent contractors rather than employees. In resolving this issue in favor of the workers, the Court developed a new test for who is considered an employee for purposes of wage orders.
In making its decision, the Court was quick to note that this new definition of who is an “employee” for wage and hour purposes is different from the definition of “employee” for workers’ compensation purposes (citing S. G. Borello & Sons, Inc. v. Department of Industrial Relations, a seminal 1989 case.
However, most legal observers believe California courts and administrative agencies are highly likely to follow the new “ABC Test” enunciated in Dynamex in other contexts, not merely wage-and-hour claims—including for purposes of determining whether workers’ compensation must be provided.
Baum, who was a featured presenter at last week’s IIABCal Blue Ribbon Conference, said that requirements “B” and “C” in the ABC Test are the “game changers.”
Test A refers to “control,” as previous tests have also done. But Test B requires the work being performed by an independent contractor to be outside the hiring entity’s business. He cited, as a possible example, an insurance agency’s decision to hire an outside contractor to provide IT-related services. That would be a service outside the scope of the insurance agency’s primary business. And Test C would require the IT consultant to be in the business of providing IT-related services.
Young encouraged member agencies to consult with legal counsel to determine whether they should take immediate actions to reform any independent contractor producer agreements they were currently using.