AB 5 – Employment Status
Assembly Bill (AB) 5, recently signed into law, replaces the common law test with the ABC test to determine whether a worker is an employee or independent contractor in California. Effective January 1, 2020, hiring entities are required to classify workers as employees unless they meet all conditions of the ABC test:
- The person is 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.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Note: After January 1, 2020, workers will be considered employees unless proven otherwise. The hiring entity must show that workers meet all conditions of the ABC test in order to classify them as independent contractors, unless there is a statutory exclusion or determination of employment. AB 5 does not change how out-of-state workers are classified.
We will continue to update this page as more information is available and provide updated seminars to help employers meet this obligation.
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AB 5 applies to work performed after January 1, 2020. Exceptions have specific requirements and the EDD will use the Borello common law test in these cases. View AB 5 for more details on exceptions.
Additionally, AB 170 exempts newspaper distributors and carriers from the ABC test until January 1, 2021.
Help Us Fight Fraud
Hiring entities are responsible for classifying their workers correctly. The EDD will continue to inspect and audit hiring entities to make sure they meet payroll tax requirements. These efforts help ensure state laws protect workers and prevent unfair competition that may lead to higher taxes and expenses for businesses.
- Frequently Asked Questions
- Employment Status
- Getting Started with Payroll Taxes
- Register as an Employer
- Fact Sheet – Payroll Taxes (DE 8714E) (PDF)
- Payroll Tax Seminars
If you have questions, contact the Taxpayer Assistance Center at 1-888-745-3886 or visit your local Employment Tax Office.