California considers new method for contractors to classify workers

April 10, 2019

California legislators are considering a new test for contractors to use when deciding whether construction workers qualify as independent contractors, according to

The proposed law would require California employers to use the "ABC" method to determine whether a worker is an independent contractor or an employee. ABC was upheld by the California Supreme Court in April 2018 and states a worker can be classified as an independent contractor if he or she is free from the control and direction of the employer as it relates to the performance of the work; performs work typically outside the hiring contractor's scope of work; and typically is engaged in the same type of work as part of the business.

A University of California Berkeley Labor Center study reports construction workers were one of three occupations in California routinely misclassified and not paid employee benefits owed to them. Independent contractors reportedly make up about 26% of the state's construction workforce.

A report from the National Employment Law Project says Connecticut, Massachusetts and New Jersey also use the ABC test in their wage and hour laws, and about half of all states apply it in some form in their unemployment laws. Ten states use it in relation to their labor laws for high-risk sectors, such as construction.

There are other tests contractors can use to determine whether a worker is an independent contractor, including an IRS method that considers how the worker is paid; whether the relationship with the hiring business is permanent; and whether the individual will achieve a profit or loss as part of his or her operations, among other factors.