Have you ever wondered whether you’re an employee or an independent contractor? Maybe you’re a freelancer, a gig worker or someone classified as an independent contractor by your employer. But do you know what that means for your rights and benefits?
In California, two critical tests can help answer that question: the ABC and Borello tests. These tests help determine whether you’re an employee or an independent contractor and can impact your employment status, benefits and tax obligations.
Comparing ABC and Borello tests
The ABC test determines whether an individual is an independent contractor or a company employee. Under this test, a worker is seen as an employee unless the organization meets the following conditions:
- The worker does not follow the direction of the company in connection with the work.
- The person works outside the ordinary course of the firm’s business.
- The individual is engaged in an independent business of the same nature as that involved in the work performed.
Meanwhile, the Borello test has the same purpose as the ABC evaluation. However, this test considers various factors, including:
- The level of control the employer has over the individual’s work.
- Whether the worker engages in other businesses that are distinct from the employer.
- Whether the worker is a crucial component of the employer’s business.
Both tests assume the individual is an employee, and the company must prove that the person is an independent contractor. However, the ABC test can be more predictable and easier to apply than the Borello test.
Under the ABC test, the worker is considered an employee if the hiring entity fails to meet the three conditions. In contrast, the Borello test considers all relevant factors on a case-by-case basis, and not one t one factor determines whether the person is an employee or a contractor.
Complying with California’s labor laws
Understanding these approaches is crucial for businesses and workers. By knowing the differences between these two tests, employees and business leaders can better understand the complexities of employee classification and ensure compliance with state laws.