What is an Independent Contractor in California?

AB 5 (codified as Labor Code s. 2775) requires application of the “ABC test” to determine if workers in California are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the IWC wage orders. An employer cannot change a person’s status from that of an employee to an independent contractor by requiring a written agreement to that effect or giving them an IRS Form 1099. The ABC test was initially adopted by the California Supreme Court in the Dynamex Operations West, Inc. v. Superior Court case in 2018. 

The ABC test has 3 elements– worker is an IC if all are met:

• 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 work and in fact.
• The worker must perform work that is outside the usual course of the hiring entity’s business.
• 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.

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The Borello Test considers multiple factors:

• whether the has all necessary control over the manner and means of accomplishing the result desired, although such control need not be direct, actually exercised or detailed.
• Whether the worker performing services holds themselves out as being engaged in an occupation distinct from the employer;
• Whether the work is a regular or integral part of the employer’s business;
• Whether the employer or the worker supplies the instrumentalities, tools, and the place for the worker doing the work;
• Whether the worker has invested in the business;
• Whether the service provided requires a special skill;
• The kind of occupation, and whether the work is usually done under employer’s direction or without supervision;
• The worker’s opportunity for profit or loss depending on their managerial skill;
• The length of time for which the services are to be performed;
• The degree of permanence of the working relationship;
• The method of payment, whether by time or by the job;
• Whether the worker hires their own employees;
• Whether the employer has a right to fire at will or whether a termination gives rise to an action for breach of contract; and
• Whether or not the worker and the potential employer believe they are creating an employer-employee relationship

ABC test is the applicable/ default test for most workers in California. The Borello test is usually required for “certain direct salespersons,” or where a court has stated the ABC test does not apply. If you have questions about your status as an independent contractor, the lawyers at Ricardo Lopez Law can help. We represent independent contractors and employees in Los Angeles and across California. As one of the leading employment law firms in Los Angeles County, we have substantial experience in wage and hour matters.