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'ABC' test applies retroactively when determining worker classification in California, court decides; dentists still exempt under ruling

February 04, 2021 6513

The California Supreme Court on Jan. 14 upheld its 2018 decision that employers’ use of the ABC test to classify their workers applies retroactively for the purposes of California wage orders.

In Dynamex Operations West Inc. v. Superior Court of Los Angeles, the court ruled that employers, with some exemptions, must follow a stricter standard, a three-part test known as the ABC test, when determining which workers can be classified as independent contractors as opposed to employees.

The ABC test was codified through legislation (AB 5) signed into law by Gov. Gavin Newsom in 2019. The requirement to use the ABC test took effect Jan. 1, 2020, but the question of whether the requirement applied retroactively to pending wage claims remained unanswered until the court’s decision last month. Most claims for unpaid wages carry a three-year statute of limitations that can be extended to four years if the plaintiff takes other specific steps, according to a recent article in the CalChamber blog HRWatchdog. 

Employers should continue to use Borello test to classify dentists, ABC test to review non-dentist staff

CDA secured an exemption to the requirements of AB 5 for dentists, as CDA previously reported. Dentists should continue to follow the Borello test to determine the proper classification of dentists in their practice. 

However, although the Borello test offers more flexibility for employers when considering whether to classify a dentist as an independent contractor, the definition of independent contractor is not black and white. 

The Labor Commissioner’s Office starts with the presumption that any worker is an employee. Furthermore, even with greater flexibility with the considerations under Borello, the more integrated the individual’s work is with the business’s bottom line and the longer the length of time the relationship lasts, the harder it is to defend that it is not an employment relationship.

With the recent spotlight on the classification relationship, many agencies are likely to scrutinize employment relationships. Dentist employers can read “Associate Agreements: Negotiating Hidden Pitfalls and Benefits,” by Michael Kowalski, DDS, JD, in the February CDA Journal to learn more about classifying associate dentists.

Employers should review current and future non-dentist office staff relationships under the new three-prong ABC test. Dental practice owners commonly classify hygienists or temporary employees as “1099” workers, but dentists should err on the side of caution and always classify the individuals as employees.

Reviewing worker classification under the ABC test

AB 5 exempted several other occupations from the Dynamex ruling, and the court decision also upheld those exemptions. All other employers, as well as dentists reviewing non-dentist staff member classification, should now be using the ABC test, which presumes that a worker is an employee unless they meet all three of the following conditions:

  • 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.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Employers can visit a California Labor & Workforce Development Agency website for employer-specific resources and FAQ on AB 5 and the ABC test.

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