California Ruling Puts Pressure on Uber, Lyft

A ruling issued on Monday will make it more difficult for employers in the Golden State to treat their workers as independent contractors, who do not enjoy many of the rights employees do, such as a minimum wage, overtime pay, workers’ compensation, unemployment insurance and paid sick leave. Independent contractors also pay their own expenses.

Many online labor platforms, such as Uber and Postmates, have said they consider the independent contractor relationship key to their business model since it would be much more expensive to provide benefits and rights to which an employee would be entitled, reported CNN.

The case that was before California’s Supreme Court involved courier service Dynamex, which converted all its delivery drivers to independent contractors from employees in 2004. Some of its workers then sued, saying they should still be classified as employees in part because they worked solely for Dynamex, which exerted significant control over the assignments they took, their pay rates, their uniforms and other aspects of the job.

The workers won in lower courts. When Dynamex appealed, the state Supreme Court not only upheld the previous decisions, but also decided to adopt a standard similar to one currently used in a handful of states, such as Illinois and New Jersey, for determining whether a worker is a contractor or an employee.

It is called an “ABC test” and it lays out three requirements an employer must meet to prove their workers are independent contractors: One, that the contractor provides the service free from the company’s control; two, that the service provided is outside the company’s core business, such as a janitor at a law firm; and three, that the contractor is an independent professional engaged in providing their service to companies other than the one in question.