Employers should be careful about classifying their workers as independent contractors. Classifying someone as an independent contractor when the law requires a workplace to designate that person as an employee could deprive the worker of benefits that he or she should have under California law. That is why the state has instituted the ABC test to clarify employee designations.
In 2019, Governor Newsom signed AB 5 into law. This legislation puts into place the ABC test. According to the California Department of Industrial Relations website, the ABC test imposes three requirements that distinguish independent contractors from regular employees.
The ABC test
According to state law, the ABC test considers a worker to be an employee unless the employer fulfills three conditions. First, the employer should not direct and control the work performance of the worker. Second, the worker should perform work outside of the normal course of the business of the employer. Finally, the business, occupation, or established trade of the worker should be of the same nature as the work the worker performs for the employer.
The ABC test does not apply to all California employment situations. In some instances the state legislature or the Industrial Welfare Commission will specifically establish an employment relationship in a way that excludes the use of the ABC test. Also, a federal judge might exclude the ABC test if federal standards apply to a job. Additionally, a state judge may rule against the use of the ABC test for particular contract relationships and occupations under the Borello test.
While the recent passage of AB 5 has provided some clarification to how workplaces should classify independent contractors, ambiguities may still exist. If you feel your employer is taking advantage of an unclear situation to misclassify you, you might need to ask a legal professional for clarification of your case.