Understanding whether you are classified as an employee or an independent contractor in California is crucial. It impacts whether you are entitled to employment benefits and rights. The state employs two main tests for this determination: the ABC test and the Borello test.
ABC test overview
Adopted by the California Supreme Court in 2018, the ABC test establishes three conditions. First, A, control and direction. The first question is whether the worker is under the hiring entity’s control and direction during the work.
Next, B, the question is whether the work performed by the worker is outside the usual course of the hiring entity’s business.
Finally, C, independent business: This looks at the independent nature of the business. If the hiring entity fails to satisfy any of these conditions, the worker is considered an employee under California law, entitled to corresponding protections.
Borello test overview
Established in 1989, the Borello test is a multifactor assessment that focuses on various aspects of the work relationship, emphasizing the hiring entity’s right to control the work. Factors considered include whether the worker has a distinct occupation or business, the extent the worker was directed, skills required and the tools and workplace provision.
Other factors include the duration of services, method of payment, the level of regular business involvement, perceived relationship by parties and the degree of permanence in the working relationship. Unlike the ABC test, the Borello test does not require meeting all factors and necessitates a case-specific evaluation for classification.
Applicability of each test
In 2019, Assembly Bill 5 was signed into law, establishing the ABC test as the default standard for most California workers. However, exemptions were provided for specific occupations and business relationships. Some exemptions include licensed professionals, certain contractors offering professional services, referral agencies and certain business-to-business contracting relationships.
While the ABC test is the default, these exemptions may be subject to different tests, such as the Borello test. It is essential to note that even exempted workers must meet particular criteria to qualify as independent contractors. Additionally, federal laws may supersede state laws for certain workers engaged in interstate commerce, such as truck drivers. In navigating the complexities of worker classification in California, understanding these tests and their applicability is vital.