Independent Contractor vs. Employee?
This has been the age-old question when it comes to classifying workers.
The new ruling from The California Supreme Court filled on 04/30/18 is adopting a new “ABC” Test versus the Borello test. The Borello test has been in use for decades.
The new “ABC” Test considers all workers to be employees and only permits workers to be classified as independent contractors if the employer can prove the worker in question meets each of the following conditions:
“ (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(b) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(c ) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
Why is this a such a big deal? For one big reason; insurance requirements amongst others. An employer has increased responsibilities for an employee versus an independent contractor. An employee is eligible for workers compensation coverage, employee benefits (depending on the size of the company), family & medical leave, unemployment insurance, safe workplace protections, etc.
From a business insurance POV: For an employee in CA; the employer must carry workers comp. For an independent contractor; an employer is not required to carry workers comp.
Pro tip: This is a good time to take a look at your Independent Contractors Agreements to make sure they still hold with the new ABC test. If they do, document it. If they don’t, it is good risk management to get a quote on adding those workers to your company’s existing workers comp policy. If your company does not have a workers comp policy, this may be a good time to purchase one. BeemaBroker can help you shop & purchase a competitive policy that meets your company’s budget! Email us email@example.com to get started.
To read the complete ruling issued by The California Supreme Court link below:
Important Disclaimer: This is general information for educational purposes only. BeemaBroker is not a laywer and this should not be interpreted as legal advice. Please consult your lawyer with any employment law questions.