California has used the 11 factor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (Borello) for almost 30 years to determine whether an individual was an employee. The Borello test arose out of cucumber farming and focused on who has control over the work and who provides the tools.
In Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County (Dynamex), the California Supreme Court revisited the Borello test, this time with a last mile package delivery company (whose main customer is Amazon). The Court found that Borello was not the proper test, ruling that a new ABC test should be used to determine whether a worker is properly classified as an employee or an independent contractor.
Under the ABC test, a worker is presumed to be an employee unless the company proves that the worker:
- (A) Is free from the control and direction of the company in performing work, both practically and in the contractual agreement between the parties; and
- (B) Performs work that is outside the usual course of the company’s business; and
- (C) Is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.
Dynamex did not change any statutes but AB 5 does
What AB 5 Does
AB 5 adds Section 2750.3 to the California Labor Code on January 1, 2020, it means that for purposes of the labor code most workers are employees with certain exceptions.
AB 5 Exceptions
A host of occupations are carved out of the ABC test. For these occupations, the Borello multi-factor test applies when determining whether a worker must be classified as an employee. Subject to certain licensing and other requirements, here is a list:
- Insurance brokers and agents
- Doctors (physicians, surgeons, dentists, podiatrists, veterinarians, psychologists)
- Professionals (lawyers, architects, engineers, private investigator or accountant)
- Financial services (securities broker-dealers, investment advisors)
- Direct sales (if compensation is based on actual sales and not wholesale purchases or referrals)
- Commercial fishermen
- Professional services (marketing, human resources administrator, travel agents, graphic designers, grant writers, fine artist, IRS agent, Payment processing Agent)
- Freelance writers, cartoonists and photographers (if contributes no more than 35 submissions to an outlet in a year)
- Licensed Hair stylists and barbers Estheticians, electrologists, and manicurists (if licensed and if can set own rates and schedule)
- Real estate agents
- Repo Agency
- A bonafide Business to Business Relationship (not an individual)
- Construction subcontractors and trucking Services
- Work done through a referral agency (animal services, tutoring, home cleaning, furniture assembly, i.e. task rabbit)
- AAA-affiliated tow truck drivers
If you are not an exception, you need to presume everyone is an employee. If you have specific questions. Please reach out to us.
martin@sanceslaw.com or ellen@sanceslaw.com
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