Under New Ruling, California Businesses May Need to Re-classify Independent Contractors

The California Supreme Court recently issued a ruling that changes the way California businesses must determine workers' status as employees or independent contractors. In order to be classified as an independent contractor, workers must meet all three requirements of the "ABC test". The hiring business must establish:

(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 such work and in fact;
(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 the work performed for the hiring entity.

If any of the ABC test criteria are not met, the worker will be considered an employee.

Do you have questions about this change in the rules, and how it might affect your business or personal taxes? Contact us today to schedule a consultation!