Index
Employment & LaborCalifornia, USA

California Independent Contractor Law (AB 5)

Summary

California's AB 5 law uses the strict 'ABC Test' to determine if a worker is an employee or an independent contractor. It is very difficult for a California company to classify a worker as a contractor.

Rights & Rules

  • 01.
    To be a legal contractor, you MUST meet all three conditions (A, B, and C):
  • 02.
    (A) You must be completely free from the control and direction of the hiring company.
  • 03.
    (B) You must perform work that is outside the usual course of the hiring company's business (e.g., a plumber fixing a pipe at a bakery).
  • 04.
    (C) You must have an established, independent trade or business doing that specific type of work.
  • 05.
    If you fail even one of these, you are legally an 'employee' entitled to minimum wage, overtime, and workers' comp.

Penalties

  • 01.
    Companies that misclassify employees as contractors face massive fines and back-pay lawsuits for unpaid wages and taxes.
  • 02.
    The state can audit and fine the company up to $25,000 per misclassified worker.

Verified Citations

California Labor Code Section 2775

Source
"A person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied..."