Whether a worker is an “employee” or an “independent contractor” is critical when it comes to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In handling a matter for which employment status is an issue—that is, employee or independent contractor—California starts with the presumption that the worker is an employee.
ABC test. The California Supreme Court’s ruling in a case exploring whether workers should be classified as independent contractors or employees established the ABC test (Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County No. S222732, Cal. Sup. Ct. (2018)). Under the ruling and subsequent legislation, California has adopted the ABC test to classify workers as a first step and has made it more difficult for California businesses to justify independent contractor classifications. The ABC test significantly toughened the test used to determine whether a worker can be classified as a contractor, and the change has had a big impact on gig economy workers. The test is putting stress on businesses such as rideshare giants Uber and Lyft because they and other gig economy entities rely on the independent contractor model, which is a far less expensive way to staff their businesses than hiring employees who are eligible to form unions, collect benefits, and be covered under an array of state and federal laws.
The ABC test presumes a worker is an employee unless the hiring entity proves the following:
A. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the ...