California’s ABC Test for Independent Contractor Classification: Employer Guide

Introduction

Under California law, any worker providing labor for pay is presumed to be an employee. A business may classify a worker as an independent contractor only by meeting each part of the ABC test. This standard is codified at Cal. Lab. Code § 2775 and was established by Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (Cal. 2018).

The ABC Test Explained

A worker is deemed an independent contractor only if all three of the following are proven:

A. Freedom from Control: The worker is free from the company’s control and direction in performing the work, both contractually and in practice.

B. Work Outside Usual Business: The work performed is outside the usual course of the company’s primary business.

C. Independent Trade or Business: The worker is customarily engaged in an independently established business, trade, or occupation of the same type as the work performed.

If any part of this test is not met, the worker must be treated as an employee. Cal. Lab. Code § 2775(b)(1); Dynamex, 4 Cal. 5th at 955–56.

Examples

Independent Contractor: A retailer hires a licensed plumber to repair a leak. The plumber controls how repairs are made, plumbing is outside the retailer’s business, and the plumber operates a separate plumbing business.

Employee: A bakery hires cake decorators to work on its cakes. Decorating is part of the bakery’s business, the bakery directs workflow, and the decorator doesn’t run a separate business.

Exceptions and Other Tests

Certain professions, referral agencies, and business-to-business relationships are exempt, in which case the multi-factor Borello test applies. See Cal. Lab. Code §§ 2776–2784.

Employer Tips

• Focus on the facts, not just contract language.

• Document working practices, independence, and evidence of outside business activities.

• Review roles regularly for compliance.

Bottom Line

California’s ABC test is strict—classification hinges on meeting all three requirements. Mistakes expose businesses to back pay, penalties, and potential lawsuits.

Citations

Cal. Lab. Code § 2775; Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (Cal. 2018); Cal. Lab. Code §§ 2776–2784; Espejo v. The Copley Press, Inc., 13 Cal. App. 5th 329 (Cal. Ct. App. 2017); Castaneda v. Ensign Grp., Inc., 229 Cal. App. 4th 1015 (Cal. Ct. App. 2014).