AB 5 – Employment Status

Assembly Bill (AB) 5, recently signed into law, replaces the common law test with the ABC test to determine whether a worker is an employee or independent contractor in California. Effective January 1, 2020, hiring entities are required to classify workers as employees unless they meet all conditions of the ABC test:

A. The person 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.

B. The person performs work that is outside the usual course of the hiring entity’s business.

C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Note: After January 1, 2020, workers will be considered employees unless proven otherwise. The hiring entity must show that workers meet all conditions of the ABC test in order to classify them as independent contractors, unless there is a statutory exclusion or determination of employment. AB 5 does not change how out-of-state workers are classified.

AB 5 applies to work performed after January 1, 2020. Exceptions have specific requirements and the EDD will use the Borello common law test in these cases. View AB 5 for more details on exceptions.