The distinction between an employee and an independent contractor can be confusing for employers and workers alike. Still, it is an important distinction to make as employees are granted rights that are not available to independent contractors. California’s “ABC test” aims to clarify when a person is considered an independent contractor and when a person is an employee.
The ABC test in California
Under a 2019 law, an “ABC test” was implemented to identify whether a person was an employee or an independent contractor. Under this test, a person will be deemed an employee by default. A person will only be considered an independent contractor if three elements are met.
First, to be considered an independent contractor you must not be controlled or directed by the employer with regards to how the job duties are performed. Second, to be considered an independent contractor, you must execute tasks that the employer is not usually engaged in as part of their business. Third, to be considered an independent contractor you must generally be involved in an independent trade or business that matches what the employer is hiring you to do.
Why is it important to be properly classified?
It is important both for workers and employers to properly classify workers as either employees or independent contractors. Employees have rights that independent contractors do not.
Employees are covered by state and federal overtime laws. Employees can pursue workers’ compensation benefits and unemployment benefits. Employees are covered by state and federal employment laws, such as the Family and Medical Leave Act. Employees are granted benefits from their employer, such as medical benefits and sick leave.
Independent contractors have rights as well. They get to control how their tasks are performed. They can negotiate the term of their compensation. Finally, they can turn down work if it does not meet their needs.
Workers deserve to be appropriately compensated under California and federal wage and hour laws. Employers do not want to make an honest mistake regarding the classification of an employee. By understanding California’s “ABC test” employers can ensure they are properly compensating their workers.