Employment Law
California starts from the assumption that you are an employee. Under the ABC test in Labor Code section 2775, the business that hired you must prove all three of the following: you are free from its control in doing the work, the work is outside the usual course of its business, and you are customarily engaged in your own independently established business of that kind. If it cannot prove all three, you are an employee.
Last updated October 4, 2026.
A 1099 form, a signed "independent contractor agreement" or the lack of payroll deductions does not settle the question. The Labor Commissioner says plainly that an employer cannot change a person's status by requiring a written agreement or by issuing a 1099 instead of a W-2. What counts is how the work is actually done. For the wider wage and hour picture, see our employment law page.
Labor Code section 2775(b)(1) applies the test for the Labor Code, the Unemployment Insurance Code and the Industrial Welfare Commission wage orders. The hiring business carries the burden on every part.
| Part | What the business must prove | How the state explains it |
|---|---|---|
| A. Control | You are free from its control and direction in doing the work, both under the contract and in fact | A worker subject to the kind of control a business typically has over employees is an employee, even if the business does not control every detail |
| B. Usual course of business | The work is outside the usual course of its business | A store hiring an outside plumber to fix a leak passes; a bakery hiring cake decorators to work regularly on its custom cakes does not |
| C. Independent business | You are customarily engaged in an independently established trade or business of the same kind | The business must already exist, shown by steps like incorporation, licensing, advertising and offering services to the public; work that depends on a single employer fails this part |
The examples above come from the Labor and Workforce Development Agency's ABC test page and the Labor Commissioner's independent contractor FAQ, which summarize the California Supreme Court's decision in Dynamex. The Labor Commissioner adds that contracted workers who fill a role comparable to an existing employee will likely be seen as working in the usual course of the business.
Yes. For some occupations and arrangements the Labor Code uses an older multi-factor test (the Borello test) instead. The Labor Commissioner's list includes certain licensed professionals such as physicians, lawyers, architects, engineers and accountants, certain insurance agents and direct salespersons, and, only if additional conditions are met first, certain professional services contracts, referral agency arrangements, construction subcontracting and business-to-business relationships. Whether an exception applies depends on the details, and the business still has to meet the conditions the law sets.
| Situation | Test used |
|---|---|
| Most workers | ABC test (Lab. Code 2775) |
| Certain licensed physicians, dentists, lawyers, architects, engineers, accountants, insurance agents, securities brokers and home inspectors | Borello test |
| Certain professional services contracts, referral agency arrangements, construction subcontracts, single engagement events, motor club services and business-to-business contracts | Borello test, only after the business meets added conditions |
| App-based rideshare and delivery drivers | Business and Professions Code 7451 (Proposition 22) |
| Certain real estate licensees and repossession agencies | Business and Professions Code rules |
| Where a court finds the ABC test cannot apply, for example because federal law preempts it | Borello test |
The Labor Commissioner explains that California's wage and hour laws, including minimum wage, overtime and meal and rest breaks, as well as workplace safety, unemployment insurance and retaliation laws, protect employees but not independent contractors. Employees can also ask state agencies like the Labor Commissioner to enforce those laws. If you are an employee, our page on how overtime is calculated in California covers the most common unpaid wage.
Expenses are another common loss. Labor Code section 2802 requires an employer to reimburse an employee for all necessary expenditures or losses incurred in direct consequence of doing the job, with interest from the date of the expense, and the reasonable costs of enforcing that right include attorney's fees (section 2802(c)). Workers treated as contractors may be paying for their own vehicles, phones, tools and supplies.
Labor Code section 226.8 makes it unlawful to willfully misclassify an individual as an independent contractor, meaning to avoid employee status by voluntarily and knowingly misclassifying someone. It is also unlawful to charge such a worker fees or make deductions that would have been illegal for an employee.
| Finding | Civil penalty per violation |
|---|---|
| Willful misclassification | $5,000 to $15,000 |
| Willful misclassification as a pattern or practice | $10,000 to $25,000 |
These amounts are in addition to any other penalties. When the Labor Commissioner enforces the section in a wage claim, it may instead recover them as damages payable to the employee (section 226.8(g)(2)), but an employee can recover either those damages or a civil penalty under Labor Code section 2699(a), not both, for the same violation. An employer found to have willfully misclassified workers can also be ordered to post a public notice about the violation for one year. Unpaid wages and other penalties are separate; see our overview of wage violation penalties in California.
If your work is on one of the Borello lists, the business does not have to pass the ABC test. Borello looks at many factors, with the right to control the manner and means of the work as a key one, alongside who supplies the tools and workplace, your investment and opportunity for profit or loss, and whether the work is an integral part of the business. Even under Borello, the Labor Commissioner says the worker is presumed to be an employee.
For the business-to-business exception, the Labor Commissioner lists twelve conditions, including a written contract with the rate and due date of payment, a business location separate from the hiring business, the freedom to work for other clients, advertising to the public, your own tools and equipment, and the ability to set your own hours. If any condition is missing, the ABC test applies.
Under Business and Professions Code section 7451, an app-based rideshare or delivery driver is a contractor only if the company does not set the driver's dates, times or minimum hours, does not require accepting specific requests, and does not restrict work for other apps or other occupations, as the Labor Commissioner summarizes it.
The ABC test has applied to wage order claims since the Dynamex decision in 2018, to the rest of the Labor Code and to unemployment benefits from January 1, 2020, and to workers' compensation from July 1, 2020, according to the Labor Commissioner. For unemployment, the EDD uses the Borello test for work before 2020.
The Labor Commissioner says a worker can be an employee under California law even if not under federal law, such as the Fair Labor Standards Act, because the tests differ. The Unemployment Insurance Code also keeps its own exclusions for some kinds of service.
For example, imagine a hypothetical house cleaner who works for a Glendale cleaning company. She signed an "independent contractor agreement," receives a 1099, and is paid a flat amount per house. The company assigns her houses each morning, sets her hours, requires its checklist, and she cleans only for this company. She buys her own supplies and drives her own car between jobs.
Under the ABC test, the company would have to prove all three parts. The daily assignments and checklist bear on part A. Cleaning houses is what the company sells, which bears on part B, much like the state's bakery example. Working for a single company with no business of her own bears on part C. The 1099 and the agreement do not decide the question. If she is an employee, her supply and mileage costs would fall under section 2802, and her hours would be measured against the minimum wage and overtime rules.
None of this predicts how her claim would come out. It tells her what to collect: the agreement, the daily assignments, her receipts and a log of her hours.
According to the Labor Commissioner, a worker can file a wage claim with its office, file a Report of Labor Law Violation when a group of workers is affected, or file a lawsuit. Our page on a Labor Commissioner wage claim or a lawsuit compares the two paths.
Possibly. The Labor Commissioner notes that the EDD uses the ABC test for work performed on or after January 1, 2020, and the EDD says workers who were incorrectly classified as independent contractors may still qualify.
No. The Labor Commissioner says the ABC test decides employee versus contractor; separate standards decide whether someone is an employee rather than a volunteer or intern.
Some. The City of Los Angeles Office of Wage Standards says the state's Freelance Worker Protection Act covers professional services contracts of $250 or more entered into on or after January 1, 2025. In the City of Los Angeles, the city's own ordinance for contracts of $600 or more still covers contracts made from July 1, 2023 to January 1, 2025, and later ones that state law does not cover.
The Labor Commissioner says a worker fired for complaining about being classified as a contractor, or about overtime, can file a retaliation complaint or sue, although it has no jurisdiction over workers who are in fact contractors. Our page on wrongful termination in violation of public policy explains firings for asserting legal rights.
Once you are an employee, the next question is whether the job is exempt. Our page on whether a salaried job is really exempt explains the duties and salary test.
Whether a worker is truly an independent contractor depends on how much control the company exercises and whether the work is part of its usual business. We review contracts, schedules, invoices and how the work is really done to determine what a client is owed. Workers in Glendale and nearby cities can read about the local agencies and courts on our Glendale employment lawyer page. Call (818) 244-9000 or request a consultation.
Our Glendale team can review how your work is set up and explain what California's ABC test means for your pay and rights.
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