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California's ABC Test is a critical legal framework determining whether a worker is an employee or an independent contractor, a classification that profoundly affects wages, benefits, and legal rights. Originating from the landmark Dynamex decision and codified by AB 5, this test has reshaped hiring, and misclassification now carries serious consequences under the law.
Need help navigating it all? MJB Law Group, a trusted boutique litigation firm in California, specializes in employment law and stands ready to protect your rights. Whether you’re an employer aiming for compliance or a worker seeking justice, MJB Law Group provides the expertise and advocacy you deserve.
When it comes to defining who’s an “employee” and who’s an “independent contractor” in California, the ABC Test has become the gold standard.
At its core, the ABC Test is a three-part standard used to determine whether a worker should be legally classified as an employee or an independent contractor. It flips the script on traditional classification methods by placing the burden of proof squarely on employers.
Why does this matter? Because how someone is classified affects everything—minimum wage, overtime, unemployment insurance, CFRA (California Family Rights Act) leave, and even workers' compensation.
For businesses, the stakes are high: misclassification can lead to lawsuits, fines, and back pay liabilities.
The ABC Test wasn’t born overnight. It emerged from years of legal wrangling, evolving laws, and landmark court decisions. One such ruling? Dynamex...
In 2018, the California Supreme Court rocked the employment law world with Dynamex Operations West, Inc. v. Superior Court. The court ruled that the longstanding Borello test wasn’t sufficient to protect workers' rights in a modern economy.
Before Dynamex, courts relied on a flexible, multi-factor test known as Borello. While nuanced, it was also murky. The ABC Test changed all that—providing a clearer, worker-friendly framework.
The decision set the precedent for using the ABC Test in wage claims and essentially rewrote the playbook for worker classification in California.
So, what exactly is the ABC Test? Let’s break it down...
“Is the worker free from the control and direction of the hiring entity in connection with the performance of the work?” If the company micromanages how the job gets done, the worker likely fails this prong.
“Is the worker performing work outside the usual course of the hiring entity’s business?”
A bakery hiring a plumber? Fine. A bakery hiring a cake decorator? Not so much.
“Is the worker customarily engaged in an independently established trade, occupation, or business?”
Do they have their own business cards, website, or other clients? This prong digs deep into entrepreneurial independence.
The test applies broadly—to nearly all wage orders and claims under the California Labor Code.
Under the ABC Test, a worker is presumed to be an employee unless the employer can prove all three prongs.
Rideshare drivers, delivery couriers, freelance content creators... the ABC Test has turned their classification into a legal battlefield.
AB 5 was signed into law in 2019 and codified the ABC Test, extending it far beyond the Dynamex case.
The bill inserted the test into the California Labor Code, making it the legal benchmark for determining worker status.
Employers must now perform due diligence to classify workers correctly or risk hefty penalties.
Pushback against AB 5 was swift. Critics argued it was too restrictive—especially for creative professionals and freelance writers.
AB 2257 introduced exemptions for dozens of industries, including:
Legal, financial, and marketing professionals—when properly structured—can also escape the ABC Test's grip.
Getting it wrong can cost you... dearly. California imposes civil penalties ranging from $5,000 to $25,000 per violation.
Misclassified workers can file claims for unpaid wages, overtime, and missed meal/rest breaks.
Misclassification also triggers audits from EDD, IRS, and triggers back payments on payroll taxes and workers’ comp.
Is your “contractor” really acting like an employee? Review contracts carefully and avoid boilerplate terms.
Use clear documentation, define roles, and avoid giving company emails or tools to independent contractors.
When in doubt, consult the pros. MJB Law Group specializes in employment law and helps businesses and workers navigate the ABC Test with confidence.
Freelancers often wear multiple hats—but the ABC Test may force them into employee status with every client.
This can limit their autonomy, increase client hesitancy to hire, and raise compliance costs.
Proper licensure, business registration, and working for multiple clients can help freelancers qualify for exemptions.
Some argue the ABC Test violates constitutional rights to contract freely. Federal law doesn’t always align.
Uber, Lyft, and others have poured millions into legal and lobbying efforts to oppose the law.
With ongoing lawsuits and ballot measures, the legal future of the ABC Test remains uncertain but firmly in play.
The federal standard—used by the IRS—focuses on 20 different control-related factors.
California’s ABC Test is more rigid and pro-worker, making dual compliance a challenge for businesses.
Companies operating in multiple states must carefully navigate both standards—or risk exposure on both ends.
Employees misclassified as contractors may now qualify for UI if reclassified under the ABC Test.
The Employment Development Department (EDD) uses the ABC Test during audits and claims investigations.
Looking for guidance through the legal maze? MJB Law Group is a boutique litigation firm that champions employees and injury victims in California. Specializing in employment and personal injury law, our team brings deep expertise and unmatched dedication to every case.
We’re located at 1442 Irvine Blvd Suite 201, Tustin, CA 92780. We’re available Monday through Friday, from 8:30 AM to 5:30 PM, making it easy to reach out when you need legal support.
Whether you’re facing wrongful termination, wage theft, or workplace injury, MJB Law Group will fight to secure justice on your behalf. With MJB in your corner, you can focus on healing while we handle the legal heavy-lifting. Contact us.
The California ABC Test isn't just legal jargon—it’s a powerful tool that reshapes how we define work relationships.
For businesses, it’s a wake-up call to review hiring practices. For workers, it’s a pathway to fair treatment and benefits. Whether you're a freelancer, a startup, or a growing company, knowing the ABCs of this test is essential...
And if you ever find yourself lost in the legal weeds? MJB Law Group is just a call away.
In rare cases, yes. But under California law, the ABC Test typically simplifies classification to one category per employer.
If specific criteria are met, B2B relationships may be exempt under AB 2257, but it's critical to document roles and agreements.
Mutual agreement doesn't override the ABC Test. California law prioritizes the nature of the working relationship over labels.
Yes. The Dynamex ruling has been applied retroactively in some wage and hour cases, unless an exemption applies.
Operate as a registered business, work with multiple clients, and keep clear documentation of independent activities.
Consult an employment law specialist like MJB Law Group to evaluate your specific case and avoid future liabilities.
