Independent Contractor or Employee - The “ABC” Test

Posted by Lee Reams Sr. on

Several states, including California, Massachusetts, and New Jersey, have adopted the so-called “ABC” test. The test is a broad means of determining a worker’s status as either an employee or a contractor by considering the following criteria:

(A) that the worker is free from the hirer’s control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

“A” follows the federal direction and control criteria, but “B” and “C” apply criteria that are not specifically included in the federal definition.  

The objective of the ABC test is to create a simpler, clearer test for determining whether the worker is an employee or an independent contractor. It presumes that a worker hired by an entity is an employee and places the burden on the hirer to establish that the worker is an independent contractor.

Examples: A plumber temporarily hired by a store to repair a leak or an electrician to install a line would be an independent contractor. But a seamstress who works at home to make dresses for a clothing manufacturer from cloth and patterns supplied by the company, and a cake decorator who works on a regular basis on custom-designed cakes, would be employees.

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