independent contractor issues

How Changes to CA Law Can Impact Your Business

In Independent Contractors by Shannon Montgomery

The majority of the country operates under the IRS suggestion for classification of employees as either true employees deserving of benefits, and employment tax withholding, or independent contractors that don’t need either of those things.

However, in April of this year, the California Supreme Court issued a ruling that changed the traditional view of employee vs independent contractor (IC) and has now made it even harder to classify workers as IC’s.

But, you’re not a CA company so why should you care? Well, for starters if you want to work with anyone in the state of CA, you have to play by these rules. And for the most part, there are a lot of very talented creatives living in the state that work as IC’s for many businesses so it’s highly possible you might wish to work with one someday. And, if you have any confusion over why misclassification of employees is a big deal, just read this article. In fact, if you haven’t read that one go do it now then come back here, you’ll have a better understanding of the issue.

What’s Changed?

There has been a multifactor test in place for close to 30 years that courts have used to determine whether someone is an employee or an IC. Some of those factors include, among other things, the workers skill set, the level of control exerted over the person, the method of payment by the hiring party, resources used by the worker, and nature of the business. The biggest factor has always been the level of control an employer has over the worker. If it’s minimal control, and the worker is able to make their own schedule use their own tools to get the work done and provide the same or similar service to many other people or businesses, then traditionally they are seen as IC’s.

ABC Test:

CA has strewn aside the multi-factor test and replaced it with the ABC test. In doing so, they have expanded the definition of “employee” under CA law.

The test looks a little something like this

A) The workers is free from control and direction of the hiring party in connection with the performance of the work, both under contract for the performance of such work and in fact; and

B) The worker performs the work outside of the normal course of the hiring parties business; and

C) The worker is customarily engaged in an independently already established trade, occupation or business of the same nature as the work performed by the hiring part.

CA presumes all workers are employees thus they are afforded the multiple protections available for CA employees. It is the hiring party’s duty to prove otherwise.

To give you an example the Supreme Court stated that a retail store hiring a plumber to repair a bathroom leak would be an IC because the plumber is not performing work that is part of the store’s usual course of business. However, a seamstress sowing at home using materials provided by the clothing manufacturer would likely be an employee of that manufacturer.

This new ruling will likely bring about new challenges to employers by workers who feel they are owed particular benefits. If a worker is actually an employee rather than an IC the employer must pay federal taxes, unemployment taxes, provide workers comp, and comply with the CA regulations regarding hours, working conditions, and wages.

What this means for you…

 If you’re on the worker side of things, review your current contracts with your employer to determine if you’ve been classified correctly. Businesses will misclassify workers pretty frequently as a way to avoid tax liability, don’t let them do this.

If you’re on the business side, be very careful how you handle working with IC’s as you build and grow your business. If you want to exert any amount of control, you’ll need to hire employees, if the work the person is going to do is integral to your business, you’ve probably got an employee, not an IC.

And of course, if you’re confused or need help reach out to me at and we can figure it out together.



Please note that this is not meant to be legal advice for you or your situation, this is merely some legal research and knowledge on the given topic