©2026 Seyfarth Shaw LLP www.seyfarth.com 2026 Cal-Peculiarities | 433 pay, wage-itemization statements, timely termination wages, meal and rest breaks, reimbursement of business expenses, and other items of pay and benefits that generally are uniquely available to employees.22 This judicial evolution continued in 2018, when the California Supreme Court’s Dynamex decision introduced the “ABC test,” making it significantly harder for businesses to classify workers as independent contractors. The Legislature then codified this test with AB 5 effective in 2020 (see § 19.6). The concurrent rise of the gig economy spurred strong industry opposition to the standard created by AB 5. In response, companies like Uber and Lyft backed Proposition 22, a voter initiative passed in November 2020, which exempted app-based drivers from AB 5 and allowed them to remain independent contractors (see § 19.7). The constitutionality of Proposition 22 became a major legal battle, with the California Supreme Court ultimately upholding its constitutionality in July 2024.23 Beyond the app-based driver industry, Senate Bill 988 was enacted in 2024, establishing the Freelance Worker Protection Act (FWPA). This law created new protections and requirements for contracts between hiring entities and freelance workers, expanding labor protections beyond traditional employment classification.24 19.6 California’s “ABC Test” The Dynamex decision. In 2018 the California Supreme Court, in Dynamex Operations West, Inc. v. Superior Court, introduced new law on whether companies can contract with workers as independent contractors instead of employees.25 Truck drivers sued Dynamex on wage and hour claims, contending that they were employees misclassified as independent contractors. At issue was whether their status should be determined under the common law test the California Supreme Court applied in S.G. Borello & Sons, Inc. v. Department of Industrial Relations26 (emphasizing the right to control manner and means of performance and some secondary factors) or under a broader test of employment found in the Wage Orders (“engage, suffer or permit to work”).27 Dynamex took this opportunity to rewrite California law without the need for any new legislation. Dynamex held that “engage, suffer or permit to work” determines employee status for Wage Order claims, requiring a defendant disputing employee status to prove (A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact, (B) the worker performs work outside the usual course of the hiring entity’s business, and (C) the worker customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hirer. Particularly difficult for a business to satisfy is Part B—that the worker performs work beyond the usual course of the defendant’s business. Contracted workers who provide services in a role comparable to that of the defendant’s existing employee will likely be viewed as working in the usual course of the hiring entity’s business. Further examples of services within the hiring entity’s usual course of business would include (i) a clothing manufacturing company hiring work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that the company will then sell and (ii) a bakery retaining cake decorators to work on a regular basis on the bakery’s custom-designed cakes. Examples of services not part of the hiring entity’s usual course of business would include (i) a retail store retaining an outside plumber to repair a bathroom leak on the retailer’s premises and (ii) a retailer retaining an outside electrician to install a new electrical line. An early—and especially disappointing—application of Dynamex came in Garcia v. Border Transportation Group, LLC.28 Garcia reversed a summary judgment against Wage Order claims by a taxi driver who alleged that Border Transportation had misclassified him as an independent contractor. Garcia held that, for purposes of seeking summary judgment, Border had failed to satisfy part C of the ABC test. Garcia stated that Dynamex adopted a
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