What are the Criteria for the ABC Test?
A worker is classified as an employee and not an independent contractor under the California ABC test unless the hiring entity satisfies the following conditions:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Why is it Called the ABC Test?
The ABC test got its name from the 3 interlocking elements of the test—parts (A), (B), and (C). It establishes a presumption that an individual performing services for an employer is an employee, not an independent contractor unless the employer can establish the 3 conditions.
Freedom from Employer's Control
One of the main factors in the ABC test is the amount of control that the employer has over the worker. The more control that is exerted, the more likely the worker is an employee. However, the hiring entity doesn't need to control the precise manner or details of the work. It is up to the hiring entity to demonstrate that it is not exerting enough control to make the worker an employee.
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Which Other States Have the ABC Test?
In addition to California, the following states use the ABC test to determine if a worker is an independent contractor or an employee:
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- West Virginia
Why Do Employers Use Independent Contractors?
Employers use independent contractors because it allows them to avoid expenses associated with employees such as taxes, training, promotions, overtime, benefits, unemployment insurance, workers’ compensation insurance, FMLA leave, and 401K. Additionally, employers can supplement their employee workforce by hiring someone who has the necessary experience to hit the ground running.
However, employing independent contractors becomes a problem when employers start to over-rely on them and, over time, begin to treat them as employees. When this occurs, problems arise for the company despite any good intentions on their part or the part of the contractor.
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