What Is the Current Independent Contractor Test

The independent contractor test, also known as the ABC test, has been a hot topic in the world of employment law. This test is used to determine whether a worker should be classified as an employee or an independent contractor. The classification is important because it affects things like taxes, benefits, and protections under labor laws.

The current independent contractor test is based on a law passed in California in 2018. This law, known as AB5, codified the ABC test and made it the standard for determining worker classification in the state. Other states, such as New Jersey and Massachusetts, have also adopted similar tests.

The ABC test has three parts:

A) The worker must be free from control and direction of the hiring entity in connection with the performance of the work.

B) The work performed by the worker must be outside the usual course of the hiring entity`s business.

C) 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.

The first part of the test, part A, looks at whether the worker is truly independent and free to make decisions about how to perform the work. This means that the worker should not be subject to the same level of control as an employee, such as being told when and where to work.

The second part of the test, part B, looks at whether the work performed is truly outside the usual course of the hiring entity`s business. For example, if a company that makes clothing hires a freelance graphic designer to create marketing materials, the designer would likely be classified as an independent contractor because the work performed is not a core part of the clothing company`s business.

The third part of the test, part C, looks at whether the worker is truly in business for themselves and has other clients or customers. This means that the worker should not be economically dependent on the hiring entity for a majority of their income.

The ABC test has been controversial because it can make it more difficult for companies to classify workers as independent contractors. This can increase costs for businesses and limit flexibility for workers who prefer freelance or contract work.

In summary, the current independent contractor test is the ABC test, which looks at whether the worker is truly independent, whether the work performed is outside the usual course of the hiring entity`s business, and whether the worker is in business for themselves. This test has been adopted by several states and can have significant implications for workers and businesses alike.