391 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com 19. Independent Contractors California is generally hostile to businesses that characterize their workers as independent contractors instead of employees. This hostility undermines the interests of workers who prefer independent status to employee status for reasons related to their personal autonomy. Workers in many situations instead may prefer employee status, however, and classifying workers as employees instead of independent contractors serves the interests of labor unions, plaintiffs’ lawyers, and governmental taxing authorities. As the power of these interests has grown, California has increasingly made it more difficult for businesses to retain workers as independent contractors. The California Legislature superseded many judicial developments in this area by enacting, during 2019, Assembly Bill 5. AB 5, effective January 2020, codified and extended the ABC test the California Supreme Court adopted in its 2018 decision in Dynamex Operations West, Inc. v. Superior Court.1 (See § 19.6). 19.1 The Plaintiff’s Preference for Employee Status 19.1.1 The individual who wants wages, benefits, penalties People who provide services as independent contractors enjoy many advantages over similarly situated employees. The advantages include lack of supervision, the freedom to schedule work, the ability to contract out the work, the avoidance of tax withholding, and the ability to make operational choices to maximize profit. Once a dispute arises between a business and its independent contractors, however, individuals who once bargained for the advantages that an independent contractor enjoys may seek to recharacterize themselves as employees. Individuals can engage in this tactic because their signed agreements—describing them as independent contractors—are not conclusive of their status. And these individuals will be tempted to engage in this tactic because employees, unlike independent contractors, can seek reimbursement of expenses they necessarily incurred in discharging their duties, challenge requirements to buy supplies from the principal, challenge, as unlawful payroll deductions, deductions made for expenses advanced, sue for payments an employer would owe for denying meal or rest breaks, seek penalties incurred for the absence of accurate wage-itemization statements, seek money payable under employee benefit plans, sue in tort for wrongful termination in violation of public policy, sue for violation of minimum-wage and overtime-pay laws, seek contractually owed payments as unpaid wages, while seeking attorney fees,
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