California’s ‘ABC test’ prevents employee misclassification

Did you know that it matters whether you are considered an employee versus an independent contractor? Employees have many rights under California law that independent contractors do not enjoy. Some employers wrongfully classify employees as independent contractors, depriving these workers of their rights under the law. For this reason, the state of California enacted the “ABC test.”

What is AB 5?

Under AB 5, which was signed into law in 2019, when employers are hiring workers, they must utilize the “ABC test” to determine whether the worker is an employee or an independent contractor. This is important because employees are covered by state wage and hour laws such as unemployment benefits, overtime and required breaks, while independent contractors are not.

What is the ABC test?

The ABC test lays out three elements that must be met for a worker to be considered an independent contractor rather than an employee.

First, the worker cannot be controlled or directed by the employee with regards to how the work is performed both as stated in the performance contract and during the course of the actual work itself. If the worker is controlled by the employer in the same way employees of that employer are, the worker is an employee.

Second, the work must be that which is outside the normal course of the employer’s business. Even if a worker is contracted, if they are doing tasks similar to those of existing employees, the worker may be considered an employee, not an independent contractor.

Third, the worker must be customarily engaged in an independent trade of the same type as that being performed for the employer. Employers cannot simply label a worker as an “independent contractor” or force a worker to sign a contract designating them as an independent contractor. Independent contractors generally take certain steps to establish and promote their own independent business.

Misclassification can affect your rights

Some employers will misclassify employees as independent contractors to cut corners financially. However, employee misclassification deprives employees of their rights under California wage and hour laws. Workers who believe they were wrongfully classified as independent contractors may want to work with a legal professional to learn more about how the law protects them.