California: employee or independent contractor?
The test depends on which law you're dealing with. A worker can be a contractor for one law and an employee for another.
| Law | Test | Statute |
|---|---|---|
| Unemployment insurance | ABC | Cal. Unemp. Ins. Code § 621(b); Cal. Lab. Code § 2775 |
| Wage and hour / wage payment | ABC | Cal. Lab. Code § 2775(b)(1) |
| Federal income tax, FICA, FUTA | IRS common-law test | IRS |
| Federal minimum wage and overtime | Economic reality test (FLSA) | DOL |
The ABC test
Under California's unemployment law, a worker is an employee unless all three parts are met:
(A) free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) performs work that is outside the usual course of the hiring entity's business; (C) customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. (Wording from the DIR FAQ on Labor Code § 2775.)
Recent change
AB 5 (2019) codified the Dynamex ABC test effective 2020-01-01; AB 2257 (2020) moved it to Labor Code §§ 2775-2787 with occupation-specific exemptions that use the Borello test.
Details and exceptions
- One ABC test covers the Labor Code, the Unemployment Insurance Code and the IWC wage orders.
- Exempt occupations and business-to-business relationships listed in Labor Code §§ 2776-2784 are judged under S.G. Borello & Sons v. DIR (1989).
- Workers' comp test not checked in this pass (Business insurance lane).
Law: Cal. Unemp. Ins. Code § 621(b); Cal. Lab. Code § 2775
Running payroll in California?
Recent changes
Last verified against the official source on October 9, 2026.
No changes recorded since we started tracking this page.
Sources
- California Department of Industrial Relations, Labor Commissioner's Office (DLSE) · data as of October 8, 2026 · last checked October 9, 2026
We copy figures from official sources and re-check them against the source before every update. See our methodology. This is general information, not legal advice.