California Legislature’s Response to the Dynamex Case Creating a New Test for Determining Status of Workers as Independent Contractors

Keith DunnaganLast year the Supreme Court made a sweeping decision related to the independent contractor classification. The decision created a new test for determining whether a worker was or was not an independent contractor. Now the legislature is moving to codify the test as anuncieated in Dynamex.

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California Legislature’s Response to the Dynamex Case Creating a New Test for Determining Status of Workers as Independent Contractors

By: P. Elizabeth Helms, Esq.

P. Elizabeth Helms, Esq.It is the one year anniversary of the landmark decision of Dynamex Operations West, Inc. v. Superior Court of Los Angeles, (2018) 4 Cal.5th 903 (“Dynamex”). On April 30, 2018, the California Supreme Court unanimously announced a new test for determining whether a worker is an employee or an independent contractor. We wrote about it shortly after the decision came out and you can find that Dynamex article on our website.

In response to the Dynamex case, the California Legislature created a new bill that, if passed, would add Section 2750.3 to the Labor Code codifying the Dynamex case.

The proposed Labor Code Section 2750.3 would repeat and codify the “ABC” test created by the Dynamex case. The proposed language is as follows:

(a) For purposes of the provisions of this code, where another definition or specification for the term “employee” is not otherwise provided, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for renumeration shall be considered an employee unless the hiring entity demonstrates that all of the following conditions are satisfied:

(1) 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.

(2) The person performs work that is outside the usual course of the hiring entity’s business.

(3) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

(b) This section and the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903, do not apply to the following occupations as defined below, and instead, for these occupations only, the employment relationship shall be governed by the test adopted by the California Supreme Court in the case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341:

(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), and Chapter 8 (commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.

(2) A physician and surgeon and 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 13401 of the Corporations Code.

(3) A securities broker-dealer or investment advisor 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.

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

(c) The addition of Section 2750.3 to the Labor Code made by this act does not constitute a change in, but is declaratory of, existing law.

Of particular note, the proposed Labor Code Section 2750.3(b) creates a few exceptions to the Dynamex “ABC” test, and instead, the traditional “Borello” test of weighing multiple factors applies. One of those exceptions applies to real estate agents but only if that agent is licensed, receives commission instead of a salary or hourly pay, and has a “written contract between that individual and the person for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to those services for state tax purposes.” (Unemployment Insurance Code Section 650(c).)

Other occupations must follow the Dynamex “ABC” test, which means many professions previously classified as independent contractors are no longer classified as such under the Labor Code. The dental profession is one such occupation that has had to evaluate how it classifies dental hygienists. Many of our clients have had to wrestle with this decision and have needed our employment law advice to help them determine if their workers are now properly classified.

If you have employees and are interested in how BPE Law Group can help you with your employment-related matters, call us at (916) 966-2260 or email Elizabeth Helms at ehelms@bpelaw.com.


The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.