A company hires workers and calls them independent contractors. They sign agreements. They get 1099s. Everyone is aligned with what they are.

Until they’re not.

That’s exactly what happened in Dynamex Operations West, Inc. v. Superior Court—a case that reshaped how California looks at independent contractors and made one thing very clear: You don’t get to decide classification. The law does.

Here’s the problem. In California, classification is not about what you call someone. It is not about what’s written in the agreement. It is not about what the worker prefers. And it is definitely not about what “makes sense” for your business. Classification is about how the relationship actually functions. And California applies that analysis aggressively.

Employers rarely get tripped up because of their bad intent. It’s speed. It’s trying to solve real business problems in real time. “We just need someone flexible—a contractor.” “They’re paid a salary—exempt.” “They’re learning—intern.” Those decisions feel practical. But California law is not built around what feels practical—it’s built around specific legal tests that don’t flex just because your situation is messy.

After Dynamex, California adopted the ABC test for independent contractors, and it is unforgiving. To classify someone as a contractor, you must prove: (A) they are free from your control and direction; (B) they perform work outside your usual course of business; and (C) they are independently established in that trade. Miss one of these, and they’re an employee. Not close. Not mostly. An employee.

And it’s not just contractors. The same problem shows up everywhere. Exempt versus non-exempt? Salary alone is not enough. Interns? The training must primarily benefit the intern, not the employer. Volunteers? Generally, that’s not a thing in for-profit businesses. Different labels, same issue: employers rely on assumptions instead of applying the actual legal standard.

What happens when this unravels is predictable, and expensive. Misclassification turns into overtime and minimum wage claims, missed meal and rest break liability, unreimbursed expenses, waiting time penalties, PAGA exposure, and often class or representative actions. And it rarely stops with one person. It spreads across the role.

The employers who stay out of trouble do one thing differently. They slow this down. They ask what the role actually looks like day-to-day, how much control they’re really exercising, and whether the classification meets the legal test and not just the business need. They make the decision at the front end, and they document it. Because fixing this later is always harder, and always more expensive.

The bottom line: Classification is not a label. It’s a legal conclusion. And when you get it wrong, it adds up fast.