These days, it’s rare for a business to operate without at least one or two independent contractors in their workforce. However, accidentally misclassifying an employee as an independent contractor can open your business up to all kinds of legal liability — including wage and hour claims.
This is where it’s important to understand California’s ABC test.
The three criteria used to determine a worker’s status
Essentially, Assembly Bill 5 (AB 5) laid down three new regulations (hence ABC) that say a worker is an independent contractor only when the following three criteria are met:
- The worker, not the business, is free to control and direct the performance of their work (both on paper and in fact).
- The work being performed is not part of the company’s usual court of business.
- The worker is a tradesman or customarily engaged in an independently established occupation or business.
These rules reflect the idea that an independent contractor has control over what work they do, when they do it, who they do it for and how that work gets done.
Exceptions to the ABC rule
Assembly Bill 2257 and Proposition 22 both created exemptions to the ABC rule for certain kinds of workers.
Under AB 2257, entertainers, writers, musicians, publicists and other media freelancers are all free to take on as many assignments from a given employer as they please without being classified as employees.
Under Proposition 22 (which was approved by the voters last November), app-based drivers (like those working for Lyft, Uber, DoorDash and GrubHub) are also not considered employees.
To avoid wage and hour actions against your company, you need a clear understanding of exactly which workers count as employees and which do not — and the process can be tricky to follow. Seek experienced legal guidance that can help.