Recently, California passed new legislation which will affect businesses around the state. The new law attempts to curb the use of independent contractors, reclassifying the contractors as employees.

The new law entitles thousands of workers across the state of California to increased pay, benefits, and employment protections. This could potentially create more work for the businesses as they try to now accommodate these workers as employees of their businesses. In fact, hiring workers as employees instead of contractors can have a great impact on a business. This could lead to 20-30% increase in labor costs, employee insurance costs, workers’ compensation, sick leave, overtime, and even protections against employment discrimination and sexual harassment.

Origins of the New California Law

In April of 2018, a California Supreme Court ruling established an “ABC Test” for determining the status of independent contractors. Under the Dynamex ruling, a worker is an employee unless the hiring entity establishes all three of the following prongs:

1. 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;
2. the worker performs work that is outside the usual course of the hiring entity’s business; and
3. 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.

This greatly expanded the definition of employee in the State of California. However, many California businesses remained confused in regards to where they stand with their independent contractors.

New California Law

As a result, the California legislature passed this new law to hopefully eliminate confusion for California businesses. Now, California businesses will have to comply with the ABC test, unless they are otherwise exempted by the state legislature.

Because all of these workers are now reclassified as employees, this significantly changes their status, their accommodations, and their legal rights. Specifically, the new employees will be automatically covered by states rights, including protections for discrimination and harassment.

New Jersey Independent Contractor Law

Although this new law is only in California, the question remains if New Jersey and other states will follow California’s lead. This new law, if passed in NJ, would provide New Jersey workers with further protections and security.

Present day in New Jersey, the “ABC Test” determines whether an employer can classify a worker as an independent contractor.

“ABC Test”

1. The worker controls and directs his or her work, not the employer.
2. The work performed occurs somewhere other than the primary business site and outside of all other places of business of the employer.
3. The worker would not lose income if the employment ended, in other words, they have another primary source of income.

If the employer cannot meet all three requirements, the employer cannot classify the worker as an independent contractor and as a result must pay the worker as an employee.

Middletown Employment Lawyers at McOmber McOmber & Luber, P.C. Provide Experienced Counsel Regarding Independent Contractors

If you have legal questions about employees vs. independent contractors, talk to a skilled Middletown employment lawyer at McOmber McOmber & Luber, P.C.. We can provide you with dedicated and personalized legal representation in all matters of employment law. Call our Red Bank office at 732-842-6500, our Marlton office at 856-985-9800, our Newark office at 973-878-9040, or contact us at 888-396-0736 or online for a free consultation. We represent clients throughout New Jersey.