Beating the Dynamex ABC Test for an “Independent Contractor”

As San Diego and California employers know by now, the California Supreme Court adopted a new test for determining when an employee is legitimately classified as an “independent contractor.” This was the Dynamex case that was decided in April 2018. See Dynamex Operations West v. Superior Court, 4 Cal.5th 903 (Cal. Supreme Court 2018). The new test is commonly called the ABC test and it is very difficult to satisfy the requirements of the test. However, it can be done, as one recent case in New Jersey demonstrates.

California was not the first state to adopt the ABC test. New Jersey, for example, adopted the ABC test pursuant to statute. See N.J.S.A. 43:21-19(i)(6). The New Jersey ABC test is essentially the same as the California test adopted in Dynamex. To legitimately classify an employee as an “independent contractor,” all three of the following must apply:

  • The employee/worker is free from control or direction over the performance of the work;
  • The service or work being done is either outside the usual course of the business for the employer; and
  • The service or work being done is customarily done by those engaged in an independently established trade, occupation, profession, or business

As noted, the ABC test is difficult to satisfy. However, a recent case decided by the New Jersey appellate court demonstrates some of the parameters of a successful classification of a worker as an “independent contractor.” See Law Office of Gerard C. Vince, LLC v. Board of Review, Case No. No. A-5441-17T2 (N.J. App. September 3, 2019) (non-precedential). The worker at issue was retained under a written consulting contract to provide paralegal work as an independent contractor. When the contract was terminated, she filed for unemployment benefits claiming that she was really an “employee.” At the trial level, the employer lost. It was determined that the employer exercised a sufficient amount of control that part A was not satisfied. Further, paralegal services were deemed to be within the core business of a law firm. Thus, part B was also not satisfied.

However, the lower level proceeding was reversed on appeal. The appeals court held that the amount of control exercised was minimal and no more than any law firm would be required to exercise. The worker was required to integrate various files into a web-based computer software system. The employer exercised quality control and identified the files to be integrated, but exercised no other control over the work or the worker. For example, the worker set her own hours, was paid via a 1099-misc. form, and also did the work from any location of her choice. According to the appellate court, those facts satisfied part A of the ABC test.

As for part B, the appellate court held that the specific tasks assigned were not the usual and customary duties of a paralegal. For example, the documents to be integrated were not client-specific and not related to ongoing cases. Furthermore, the work was done off-location and during off-hours. New Jersey’s ABC test allows for part B to be satisfied if all the work is done at a location that is not owned or controlled by the employer. For both reasons, the appellate court held that part B of the test was satisfied.

As for part C, paralegals are required to be certified. Further, their training is separate and apart from the training and certifications needed for lawyers. Finally, this particular worker also worked for other businesses, set her own hours, and independently advertised her services as a certified paralegal. Taking all these facts together, the court held that the worker satisfied part C of the ABC test.

Legal takeaway

While a New Jersey case is not controlling on a California court, the case provides some guidance on how San Diego and California employers might put forth a successful defense of their worker classifications. The case also provides some insight into how California independent contractor agreements should be modified.

Contact San Diego Corporate Law

If you would like more information about drafting and implementing your employee handbook, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can also assist with any other employment or business-related matter. Mr. Leonard proudly provides legal services to business owners in San Diego and the surrounding communities. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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