Aug 14, 2018
A recent California Supreme Court ruling could have far reaching consequences for brokers — Dynamex Operations West Inc. v. Superior Court. The ruling created the ABC Test to determine whether a worker is an independent contractor or an employee. CAHU warns that the ruling could hurt brokers’ commissions as well as their ability to serve clients and work independently. It could also affect brokers’ tax reporting and deductions. As a result of the ruling, workers can only be considered independent contractors if the hiring entity proves all three of the following:
- The worker 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 worker performs work that is outside the usual course of the hiring entity’s business
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed
CAHU is raising the alarm because agents could be required to become W-2 employees for every insurance carrier they contract with or are appointed with. The new standard could potentially reach back four years, which could financially destroy an agency/company that was fully compliant in operating under the previous standard of an Independent Contractor. This is because California’s Labor Code Private Attorneys General Act provides statutory penalties. Dynamex will not be appealed since the court has refused to rehear the case. CAHU has partnered with over 100 other associations to seek a legislative solution, but key decision makers need to hear from brokers! Brokers can sign-up and have their voices heard by visiting the I’m Independent Coalition.
