California (CA) law classifies all workers as employees. Therefore, the burden is on the employer to prove that the employee is an independent contractor. CA follows the following rule when determining if a worker is an independent contractor, called the ABC test.
Under the ABC test, the employer must meet all three factors before classifying a worker as an independent contractor. Pay attention to B.
- The worker remains free from managerial direction and control related to the worker’s performance
- The worker performs tasks outside of the scope of the hiring company’s business.
- The worker is customarily engaged in an independently established trade, occupation, or business of the exact nature of the hiring entity’s work.
According to Society for Human Resources Management, Prong B is complex for businesses to prove. An example of requirement B would be a retail business hiring an electrician as an independent contractor to work in their store. An electrician’s job is not a usual occupation in the retail industry. However, if you hire a sewist as an independent contractor, CA law challenges this designation in this case because the retail sector requires a sewist and their services.
Misclassifying independent contractors remains one of the more significant risks facing California employers or any business entering California. If you have questions about your current employees’ status in California, My HR Advisors can help you navigate California law and ensure that you remain compliant.