Employee Misclassification

Are you an independent contractor? 

In September 2019, Governor Newsom enacted AB5, which requires employers wishing to classify workers as independent contractors to satisfy the “ABC” test, as initially provided by Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903. Under the ABC test, the hiring entity must satisfy all three of the following conditions to establish a worker is an independent contractor:

  • The worker must be free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • The worker must perform work that is outside the usual course of the hiring entity's business; and
  • The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Analysis of these three factors can be nuanced. But an employer must show that all three have been met in order for a worker to be properly deemed an independent contractor.

Be aware that certain occupations and industries do not have to meet the three factors in the ABC test. For example, there are exceptions for construction industry employees. For those who qualify under an exception, they must nonetheless satisfy the multi-factor “Borello” test to be properly deemed an independent contractor.