LEGAL DISCLAIMER: This article provides general, informational content for educational purposes only. It is not a substitute for professional legal advice from a qualified attorney. Always consult with a lawyer for guidance on your specific legal situation.
Imagine you own a small coffee shop. One day, a pipe bursts, and you call an emergency plumber. The plumber arrives with their own tools, gives you an invoice for the job, and then leaves to serve other clients. Are they your employee? Of course not. They're an independent contractor. Now, imagine you hire a barista to work a regular 9 AM to 5 PM shift. You provide the espresso machine, set their schedule, train them on your recipes, and tell them how to greet customers. Are they an independent contractor? No, they are clearly an employee. For decades, the line between these two scenarios could get incredibly blurry in California, leading to confusion and disputes. Then, in 2018, the California Supreme Court case Dynamex Operations West, Inc. v. Superior Court dropped like a bombshell. It swept away the old, complicated test and installed a new, much stricter standard called the “ABC Test”. This single ruling fundamentally changed the definition of an “employee” for many California workers and businesses, especially in the burgeoning gig economy. It made it significantly harder for companies to classify workers as independent contractors, sending shockwaves through industries from trucking to tech.
Before the *Dynamex* earthquake, the ground rules for worker classification in California were defined by a different landmark case: S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989). For nearly 30 years, the `borello_test` was the law of the land. Unlike the simple-sounding ABC test, *Borello* was a complex, multi-factor balancing act. The most important question it asked was about the “right to control.” In essence, the more control a company had over the *manner and means* of how a worker performed their job—not just the final result—the more likely that worker was an employee. However, “control” was just the start. Courts would look at a whole host of secondary factors, creating a murky legal environment. These factors included:
The problem with the *Borello* test was its unpredictability. Because no single factor was decisive, two different judges could look at the exact same working relationship and come to opposite conclusions. This created uncertainty for both businesses, who struggled with compliance, and workers, who were unsure of their rights. This legal gray area is the world into which *Dynamex* was born.
The *Dynamex* case wasn't created in a vacuum. It was an interpretation of existing laws that were designed to protect workers. The primary legal pillars were California's Industrial Welfare Commission (IWC) Wage Orders. The `iwc_wage_orders` are a set of industry-specific regulations that govern wages, hours, and working conditions in California. These orders contain their own broad definition of “employ,” which includes “to suffer or permit to work.” The California Supreme Court in *Dynamex* decided to look closely at this definition. They reasoned that this language was meant to be expansive, to protect workers who might be improperly labeled as independent contractors to avoid the costs and responsibilities of employment, such as paying for unemployment_insurance and adhering to `minimum_wage` laws. The court decided that to properly apply this protective definition from the wage orders, a simpler, clearer, and more worker-protective test was needed. They didn't invent the ABC test from scratch; they adopted a version already used by other states like Massachusetts. The court's decision was essentially that for the purposes of the wage orders, the old *Borello* test wasn't sufficient to protect workers from `worker_misclassification`.
Worker classification isn't just a California issue, but the Golden State's approach is now one of the most stringent. A look at other jurisdictions reveals a patchwork of different standards.
| Jurisdiction | Primary Test | Key Factor(s) | What It Means for You |
|---|---|---|---|
| California (Post-Dynamex/AB5) | The ABC Test | The business must prove all three prongs: (A) Worker is free from control, (B) Work is outside the usual course of business, AND (C) Worker is engaged in an independent trade. | This is a very high bar for a business to clear. You are presumed to be an employee unless your work is truly separate from the company's core business. |
| Federal Law (IRS / FLSA) | Economic Realities / Common Law Test | A multi-factor test focused on behavioral control, financial control, and the relationship of the parties. It's a balancing act similar to *Borello*. | The IRS and `department_of_labor` look at the “totality of the circumstances.” It's more flexible than the ABC test but can also be more confusing and unpredictable. |
| Texas | Right to Control Test | Primarily focused on who has the right to control the “progress, details, and methods of operations.” Very similar to the main factor in the old *Borello* test. | If a company dictates how, when, and where you do your work, you are likely an employee. If they only care about the final result, you are likely a contractor. |
| New York | Overall Control Test | Similar to the federal and *Borello* standards, it examines multiple factors to determine the degree of control and supervision exercised by the hiring party. | The analysis is fact-specific and holistic. No single factor determines your status, leading to a case-by-case evaluation. |
The ruling in *Dynamex v. Superior Court* created a simple, powerful, and demanding standard. It starts with a crucial presumption: every worker is an employee. The burden of proof is entirely on the hiring company to prove otherwise. To do so, the company must demonstrate that the worker satisfies ALL THREE of the following conditions (Prongs A, B, and C). If they fail to prove even one prong, the worker is legally an employee for the purposes of the wage orders.
This prong is the most similar to the old `borello_test`. It examines whether the hiring company has the right to control how the worker performs their tasks, both under the contract and in reality.
This is the most revolutionary and impactful part of the ABC test. It is the prong that most directly affects gig economy companies and businesses that rely on a core group of contract workers.
This final prong checks whether the worker is truly in business for themselves. It’s not enough for a company to simply allow a worker to have other clients; the worker must have an independent business that would survive even without this specific hiring company.
The shift from *Borello* to the ABC test was not just a theoretical legal change; it has profound, real-world consequences. Here is a practical guide for both workers and business owners navigating this new landscape.
Ask yourself the tough questions based on the three prongs. Be brutally honest.
If the answer to any of these questions suggests you are an employee, you may be misclassified.
Evidence is everything. Start collecting and organizing key documents that define your working relationship.
If you are found to be a misclassified employee, you may be entitled to significant compensation, including:
You have several pathways to address misclassification.
Do not assume your long-standing contractor relationships are safe. Proactively review every 1099 worker using the ABC test as your guide. The burden of proof is on you.
This is the make-or-break test for many businesses. If a contractor performs the core service your company offers to the public, it is extremely difficult to classify them as a contractor. You may need to seriously consider reclassifying these workers as employees or restructuring your business model.
For contractors who perform auxiliary roles (like the plumber for the coffee shop), you should still strengthen their independent status.
The financial risks of getting it wrong are enormous and can include:
The *Dynamex* decision was not the end of the story; it was the beginning of a massive political and legal battle over the future of work in California.
In 2019, the California Legislature passed Assembly Bill 5, more commonly known as `assembly_bill_5_(ab5)`. This landmark legislation took the ABC test from the *Dynamex* court decision and officially wrote it into the California Labor Code, expanding its application beyond just wage orders to nearly all aspects of employment law in the state, including unemployment insurance and workers' compensation. AB5 was a monumental victory for labor advocates but a source of immense concern for businesses and freelancers. The law included a complex web of exemptions for certain professions—like doctors, lawyers, accountants, and some creative professionals—who would still be evaluated under the old *Borello* test. However, for many others, including truck drivers, gig workers, and many freelance writers and artists, AB5 made it nearly impossible to continue working as independent contractors.
The companies most directly threatened by AB5—namely ride-sharing and delivery app giants like Uber, Lyft, and DoorDash—responded with a historic political campaign. They sponsored a 2020 ballot initiative called Proposition 22. `proposition_22` was designed to create a special carve-out from AB5 specifically for app-based drivers and delivery workers. The companies spent over $200 million on their campaign, making it the most expensive ballot measure in California history. Prop 22, which passed with 59% of the vote, reclassified these workers as independent contractors but also granted them a new set of limited benefits, such as a minimum earnings guarantee (based on engaged time, not total time), healthcare stipends, and accident insurance. Prop 22 remains a subject of intense legal challenges, with courts debating its constitutionality.
One huge question left open by *Dynamex* was whether its ABC test applied to work performed *before* the 2018 decision was issued. In 2021, the California Supreme Court answered that question in `vazquez_v_jan-pro_franchising_inc`. The court held that Dynamex is retroactive. This meant that businesses could be held liable for misclassifying workers for years prior to the *Dynamex* ruling, significantly increasing their potential financial exposure for past `wage_and_hour_law` violations.
The fight over worker classification that erupted in California has gone national. The “California model” of using the ABC test has become a key policy goal for labor unions and worker advocates across the country.
The traditional 9-to-5 job is no longer the only model of work. The rise of the platform economy, remote work, and artificial intelligence will continue to challenge our legal definitions of “employee” and “employer.” We can expect to see continued legal and legislative struggles over these definitions. As AI-powered platforms begin to manage and direct workers with even less human intervention, new questions about control and the “usual course of business” will arise. The *Dynamex* decision was a pivotal moment, but it is clear that the debate it ignited about the nature of work and the social contract between companies and their workers is far from over.