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The ABC test: employee or independent contractor?

In California the default is employee. To classify someone as a contractor, the hiring business has to satisfy all three parts of a test — and the middle one defeats most arrangements.

Why classification matters so much

Employees get minimum wage, overtime, meal and rest periods, expense reimbursement, workers' compensation cover and unemployment insurance. Contractors get none of those.

Misclassification therefore does not produce one claim — it produces a stack of them, which is why these cases are worth disproportionately more than they first appear.

The three parts

A — the worker is free from the control and direction of the hiring entity in performing the work. B — the work performed is outside the usual course of the hiring entity's business. C — the worker is customarily engaged in an independently established trade or business of the same nature.

All three must be satisfied. Part B is where most arrangements fail: a delivery business engaging delivery drivers as contractors struggles with it regardless of how the contract is written.

What does not decide it

A written agreement calling you a contractor. Being paid on an invoice. Receiving a 1099. Having your own business licence. All of these are consistent with either classification, and none of them settles the question.

There are also statutory exemptions for a number of occupations and relationships, which are genuinely complicated — an exemption from the ABC test does not mean contractor status is automatic, only that a different and older test applies.

Look at part B first

It is the fastest sorting question and the one most arrangements fail. Ask plainly: is the work I do the thing this business sells? If yes, the classification is on shaky ground however the paperwork reads.

Common questions

I signed a contractor agreement. Does that end it?
No. Classification is determined by the actual relationship, not by the label the parties chose. An agreement cannot waive protections the law provides to employees.
What am I owed if I was misclassified?
Potentially unpaid overtime, break premiums, unreimbursed business expenses, and associated penalties — often reaching back several years. This is why an assessment is worth getting.