For clubs throughout the country, the problem of misclassification of employees has been an issue for some time. Recently, the California Supreme Court established a new standard for how a golf course in the Golden State determines if a worker is an independent contractor or an employee under California’s wage order. This standard will likely help to classify more workers as employees rather than independent contractors.
The supreme court produced this new standard in a case entitled Dynamex Operations West, Inc. v. Superior Court (Lee). Though the supreme court did not answer whether the workers in that case were independent contractors or employees, it did provide a clear standard as to how California will go about making that determination.
Specifically, the court said that when enforcing California’s wage orders (the minimum wage, overtime, work hour, meal and break requirements established for specific industries) the focus should now be on whether an employer “suffers or permits” a worker to work. If the employer does either, then the worker is an employee, not an independent contractor.
Since this “suffer or permit to work” standard is a bit broad, the court had to establish new guidelines to clarify this standard for employers. As such, a new test was created—the ABC test.
For California golf clubs that utilize caddies, fitness professionals, massage therapists and others who work under the independent contractor classification, this new test could pose a significant problem. Under the ABC test, California now presumes a worker is hired as an employee unless the employer can prove all of the following:
- That the worker is free from the control and direction of the employer in the performance of the work, both under the contract for the performance of the work and in fact; and
- That the worker performs work that is outside the usual course of the employer’s business; and
- That the worker is customarily engaged in an independently established trade, occupation or business that is the same nature as that involved in the work performed.
The court went on to say that under “A” an employer does not need to control the “precise manner or details of the work” to still be in control and direction of the worker. This could mean that the overall guidance and direction often provided by clubs to caddies could be enough to fail on this point.
Under “B,” the court clarified that any worker who is reasonably seen as offering services to the employer in a role comparable to an employee or who would be seen by patrons as working for the employer rather than for his own business can be enough to fail on this factor. For a golf club that hires fitness trainers to work in the fitness center, this factor could be hard to meet.
The court explained under “C” that any worker who wants to be classified as an independent contractor must have chosen “the benefits and burdens of self-employment.” To prove this, the worker should do things traditionally associated with running a business, like incorporating, acquiring necessary licenses, advertising and offering his services to numerous clients. Thus, any independent contractor who works solely for the club and who has not done some reasonable and expected things to present himself as an independent business may make it hard for the club to meet this factor.
For the last few years, the National Club Association has been reminding club leaders that federal law has been less than favorable when it comes to determining if a worker is an independent contractor or employee. With this new ruling from the California State Supreme Court, the largest state in the union has now made it much more difficult for golf clubs subject to a wage order to classify a worker as an independent contractor, too.
Ultimately, this case provides an additional reason for private clubs to reconsider how they classify their caddies and other independent contractors—especially clubs in California. Under a worst-case scenario, other states could adopt the ABC test to clarify what it means to “suffer or permit to work.” If that happens, it could change the way our industry does business for years to come.
It is advisable to think long and hard before simply saying that a caddie, yoga instructor, etc., is automatically an independent contractor. Though that may have been the way your club has always classified such a worker, things are changing, and that decision is no longer as easy as ABC.