Background
The three-pronged exercise commonly known as the “ABC test” is used to determine whether a worker should be classified as an employee or independent contractor.
Summary
Existing law exempts certain occupations and business relationships from the application of the ABC test. Under an amended law, effective January 1, 2022, California will designate the following professions as exceptions to the ABC test:
- Licensed Manicurists: Already exempted under the existing law, this exemption has been extended to January 1, 2025.
- Construction Trucking Services: Already exempted under the existing law, this exemption has been extended to January 1, 2025.
- Data Aggregators: The amended law clarifies this exemption to apply to the association between a data aggregator and a “research subject” if certain conditions are satisfied. The condition includes that any consideration paid for the feedback provided, if prorated to an hourly rate, should be equal to or greater than minimum wage.
- Insurance-related Services: The amended law expands this already exempted category to include claims adjustors and third-party administrators of claims within the insurance and financial service industries.
- Manufactured Housing Salespersons: Existing law exempts a manufactured housing salesperson from the ABC test, subject to the legal obligations governing the occupation. The update clarifies that employers should not consider the statutorily imposed duties of a manufactured housing dealer as considerations in the multifactor test.
If an exemption to the ABC test applies, employers must refer to the expanded multifactor method, also known as the “Borello Test” to determine the employee’s correct classification.
Employers Next Steps
- Employers should review the updates that become effective in 2022 to ensure their workers are classified correctly based on the ABC test updates.
- If you are a Full-Service or Virtual HR client and would like additional guidance on how to classify your workforce, please email us.
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This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this content, please contact HR Knowledge at 508.339.1300 or email us.
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