20 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com • the alleged employee's opportunity for profit or loss depending on his or her managerial skill; • the length of time for which the services are to be performed; • the degree of permanence of the working relationship; • the method of payment, whether by time or by the job; and • whether the parties believe they are creating an employer-employee relationship (this factor is relevant, but not determinative).86 Rejecting this Borello test, Dynamex concluded that the “exceptionally broad suffer or permit to work” test of California’s Wage Orders requires a more expansive definition of employment: the “ABC” test.87 The ABC test deems a worker to be an employee unless the hiring entity can show all three of the following factors: A. The worker is “free from control and direction of the hiring entity in connection with the performance of the work,” both in contract and in fact. B. The work is outside the usual course of the hiring entity’s business. C. The worker is customarily engaged in an independently-established trade, occupation, or business.88 The Dynamex ABC test is significantly more plaintiff-friendly than the flexible Borello test, particularly as to workers engaged in work that is part of the hiring entity’s business. 1. Freedom From Control and Direction of the Hiring Entity Part A, the “freedom from control” element of the test, looks to whether the worker “is subject, either as a matter of contractual right or in actual practice, to the type and degree of control a business typically exercises over employees.”89 With respect to this element, the hiring entity need not control the “precise manner or details of the work” as long as it retains the type of control an employer typically has over its employees.90 2. Outside the Usual Course of the Hiring Entity’s Business Part B, the most difficult element of the ABC test for many defendants to meet, requires that the worker’s work be outside the usual course of the hiring entity’s business. Courts have applied this requirement in many contexts, 86 California Department of Industrial Relations publication, “Independent Contractor Versus Employee” (summarizing Borello factors). Available here: https://www.dir.ca.gov/dlse/faq_independentcontractor.htm (last visited Sept. 29, 2023). 87 Dynamex, 4 Cal. 5th 903 at 952. 88 Id. at 958-63. 89 Id. at 958. 90 Id.; Borello, 48 Cal. 3d at 357 (“A business entity may not avoid its statutory obligations by carving up its production process into minute steps, then asserting that it lacks ‘control’ over the exact means by which one such step is performed by the responsible workers.”).
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