California’s independent contractor rules are among the strictest in the nation. The passage of AB 5 and the adoption of the ABC test significantly changed how businesses classify workers. Misclassification can result in penalties, back wages, and lawsuits. Understanding these rules is essential for compliance. Attorneys at SBEMP (Slovak, Baron, Empey, Murphy & Pinkney) law firm provides professional legal advice and services to clients in Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, and surrounding communities.
Understanding the ABC Test
The ABC test determines whether a worker can legally be classified as an independent contractor. A worker is considered an employee unless the business can prove all three conditions:
A. The worker is free from the company’s control.
B. The worker performs work outside the usual scope of the company’s business.
C. The worker operates an independent business doing similar work.
Failing any part of this test generally means the worker must be classified as an employee.
Industries With Exemptions
Some industries have exemptions, including certain professional services, real estate agents, and business-to-business contractors. Even with exemptions, businesses must follow alternative classification tests. Because exemptions are detailed and complex, legal review is recommended.
Risks of Misclassification
Misclassification can lead to significant financial consequences. California imposes penalties for unpaid wages, unpaid overtime, missed breaks, payroll tax issues, and workers’ compensation violations. Employers may also face class actions and PAGA claims. These risks make proper classification essential.
How to Ensure Compliance
Businesses should review job duties, hiring practices, and contracts. Independent contractor agreements should clearly outline the contractor’s responsibilities, autonomy, and business structure. Regular audits help ensure ongoing compliance as laws evolve.
Legal Support for Worker Classification
SBEMP helps California employers understand independent contractor rules, conduct compliance audits, and minimize risks. Legal guidance is essential to avoid costly disputes and ensure correct classification.
Have any legal questions? Contact the Attorneys at SBEMP Law Firm:
For more information or to request a consultation please contact the law offices of SBEMP (Slovak, Baron, Empey, Murphy & Pinkney) by clicking here.
SBEMP LLP is a full service law firm with attorney offices in Palm Springs (Palm Desert, Inland Empire, Rancho Mirage, Indian Wells), CA; Indian Wells, CA; Costa Mesa (Orange County), CA; San Diego, CA; New Jersey, NJ; and New York, NY.
DISCLAIMER: This blog post does not constitute legal advice, and no attorney-client relationship is formed by reading it. This blog post may be considered ATTORNEY ADVERTISING in some states. Prior results do not guarantee a similar outcome. Additional facts or future developments may affect subjects contained within this blog post. Before acting or relying upon any information within this newsletter, seek the advice of an attorney.