We wanted to make you aware of the potential impact of a May 1st decision by the California Supreme Court, the Dynamex decision, that creates great confusion and possible demise of the classification of an individual as an independent contractor vs an employee. There has traditionally been a multiple factor test under California legal precedent for the last 30 years on whether someone is an independent contractor largely resting on the ability to control the work and independence as a professional. Physician groups often would often classify such individuals as independent contractors and not employees in the case of a locum tenens relationship or other type of non-partner/ shareholder or traditional employee relationship. This decision impairs the ability to do so and could put the entity at risk to a challenge that the individual should be reclassified.
The Dynamex decision, which is final since Ca. Supreme Ct and no federal jurisdiction, creates what is known as the ABC test of three factors and creates a presumption that the individual is an employee unless the relationship meets all three of the criteria. The ABC test is;
- That the worker is free from control and direction of hiring entity in performance of the work, and
- That the worker perform work that is outside the usual course of the hiring entity's business, and
- That the worker is customarily engaged in an independently established trade, occupation or business
As you can see the second factor would be difficult to meet if a pathology group were to retain a pathologist as an independent contractor when that individual would provide pathology services, the usual course of business/ service of the pathology group.
This decision is far reaching and impacts a wide variety of professions and industries and certainly the emerging "gig" economy players like UBER and Lyft. There was an effort led by the Chamber of Commerce at the end of the Legislative session to delay the impact of the Dynamex decision until early next year when the Legislature could refine the elements of the test and exempt certain types of occupations/ professions like physicians. The CSP was involved in lobbying for that delay but Legislative leadership chose not to act and preferred to wait until next year. Unions in California argued against any delay in application since they favored the decision.
We would encourage you to consult with legal counsel if your group has any independent contractor relationships with pathologists. Some would argue that existing Wage Orders from the Industrial Welfare Commission might exempt physicians from this classification if certain factors are met. These Wage Orders are very old and not all attorneys would concur. We also raised the issue of contracts between hospitals and pathology groups for 24/7 coverage that specifies that the pathology group is an independent contractor. That situation should be of lesser concern since Ca. law prohibits hospitals from employing physicians.
The CSP will continue to seek clarification and specific exemption from this decision when the Legislature returns in January.
