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Legal questions focused on worker classification take on special significance in a state where some of the biggest and most visible on-demand companies were founded.

The California Supreme Court used real-world examples to explain its highly anticipated ruling that adopted a more structured test for how companies must classify their workers: A plumber who’s hired to fix a problem in a retail store is an independent contractor. A cake decorator at a bakery should be considered an employee.

The ruling, with wide implications for the gig economy, put in place a new test that uses three distinct factors to determine whether a worker is an employee or an independent contractor. Monday’s decision changes the standard from the more flexible one that had been used in the state since 1989.

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