In a unanimous decision yesterday, California’s Supreme Court ruled in favor of independent contractors seeking employee status from a last-mile delivery service in a case that could have wide ramifications for Uber, Lyft, Amazon, Instacart, and other companies buoyed by the sweat of the gig economy.
First filed in April of 2005, the suit alleged that drivers for Dynamex had been misclassified as independent contractors. Starting in 2004, drivers were required to provide their own vehicles—and pay for all the incurred costs that came with that, like gas, maintenance, insurance, and tolls—while being “generally expected to wear Dynamex shirts and badges [...] and/or the customer’s decals to their vehicles when making deliveries for the customer.” Those customers included companies like Home Depot, Office Depot, and Amazon.
With no guarantee on the type or number of deliveries they’d be making, shouldering all the liability, and facing termination at any time for any reason, life for Dynamex workers seems both grim and totally ordinary in the landscape of gig work. They were converted from employees to this new, more precarious classification “after management concluded that such a conversion would generate economic savings for the company,” the ruling states, creating a deeply lopsided power dynamic.
In Chief Justice Tani Cantil-Sakauye’s words:
Such incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees [...] When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor by the unilateral action of a hiring entity, there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification.
California’s Supreme Court applied the so-called “ABC test” to Dynamex’s drivers. Used in several states, the test is a broad means of determining a worker’s status as either an employee or a contractor by considering the following criteria:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is 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 performed for the hiring entity.
The state court found “a sufficient commonality of interest” in regards to B and C. The court’s findings will likely be an important point of reference in future suits seeking to reclassify gig workers as employees.
Read the ruling in full here.