Am I an employee or an independent contractor?

This page is general information, not legal advice. DNLH is not a law office.

Why does it matter what I am called?

Because the label decides which protections you get. In California, an employee has the right to:

• At least the minimum wage, for every hour
• Overtime pay
• Meal and rest breaks
• Paid sick days
• Workers' compensation if hurt on the job
• Disability Insurance and Paid Family Leave, if paid into the state fund
• Protection from retaliation when you speak up

An independent contractor runs their own business. Contractors set their own prices and hours, but most of the protections above do not apply to them.

Some businesses call workers "contractors" to skip these costs. When the label is wrong, that is called misclassification. If you are really an employee under the law, you keep your employee rights, whatever the paperwork says.

What is the ABC test?

California made this test the law with AB 5, which took effect January 1, 2020. It is now in Labor Code section 2775. Under the test, you are an employee unless the business that pays you can show all three of these:

• A. You are free from its control. The business does not direct how you do the work, either in your contract or in real life.
• B. Your work is outside its usual business. For example, a plumber fixing a sink at a clothing store. A driver for a delivery company fails this part.
• C. You have your own independent business in this kind of work. You usually do it for others too, on your own.

The burden is on the business, not on you. If it fails even one part, you are treated as an employee under most California wage laws.

Quick check. Answer for your job:

More "yes" answers in the right column usually mean you are an employee.

Example. This is a made up example. Marta cleans houses for a cleaning company. The company books the clients, sets her schedule, sets the price and gives her supplies. It calls her a contractor and sends her a 1099. Cleaning is the company's main business (fails B), it controls her work (fails A), and Marta has no cleaning business of her own (fails C). Under the ABC test she is most likely an employee. If Marta instead had her own clients, set her own prices and sometimes took a job from the company, the answer could be different.

Are there exceptions?

Yes. California law lists some jobs and situations where the older test, sometimes called the Borello test, is used instead of the ABC test. Common ones:

• Licensed professionals with an active California license, such as doctors, dentists, psychologists, veterinarians, lawyers, architects, engineers, private investigators and accountants (Labor Code 2783). The same section also covers insurance licensees, securities brokers, some direct sales workers, commercial fishers and newspaper carriers, among others.
• Real business to business deals, where you run a real business with its own place, required license, written contract, tools and other clients (Labor Code 2776).

Other sections cover more situations, like some construction subcontractors and referral agencies. If your job is not on these lists, the ABC test usually applies. If your job might be one, ask a workers' rights clinic. Even under the older test, the question is still how much control the business has over your work.

What about rideshare and delivery apps?

Drivers for app companies like rideshare and food delivery are covered by a separate law, Proposition 22, passed by voters in 2020. It treats these drivers as contractors but gives some minimum earnings and other benefits. On July 25, 2024, the California Supreme Court upheld Proposition 22 against a challenge to it (Castellanos v. State of California). So it is still the law for app based drivers.

Before you act, read Your rights as a rideshare, delivery or gig worker or ask a clinic. Other gig work that is not app based driving or delivery still uses the ABC test.

What do I do if I think I am an employee?

1. Keep records starting today. Write down your hours, who gave you orders, what you were paid and how. Keep texts, schedules and payment app screenshots. See What should I write down?
2. Save any contract or 1099 tax form. These help show how you were paid.
3. Talk to a free clinic about your options and risks.
4. File a wage claim for wages, overtime or breaks you were not paid. The Labor Commissioner says that if you think you were misclassified, you can still file, and a hearing may decide your status. On the claim form, check yes on the question about being treated as an independent contractor. See How to file a wage claim.
5. Ask for the benefits you paid for or should have. See Paid as a contractor? How to apply for disability or family leave.

You do not need your employer's permission to file, and you do not need a lawyer. The Labor Commissioner says it does not ask about immigration status.

What can I get back?

If you were misclassified, you may be owed what an employee would have earned:

• Minimum wage and overtime you did not get
• Pay for missed meal and rest breaks
• Paid sick days
• Money you spent on work costs, like gas, tools or a phone. See Does your employer have to pay you back for tools, gas and phone?

Most of these reach back three years from the day you file. California law also penalizes businesses that willfully misclassify workers, meaning they knowingly call an employee a contractor to avoid employee status. The civil penalty is $5,000 to $15,000 for each violation, or $10,000 to $25,000 for each violation when the business has a pattern of doing it (Labor Code 226.8). There is a box for this penalty on the Labor Commissioner's wage claim form. These penalties are set by the state or a court; they are not a promise of what you will receive.

What about taxes?

When you are paid as a contractor, no taxes are taken out of your pay. You may owe self employment tax. The IRS says you must file a tax return if your net earnings from self employment were $400 or more. If you do not have a Social Security number, you file with an ITIN.

See How to pay taxes on self employment income with an ITIN and Where to get free tax help if you file with an ITIN.

The IRS uses its own test to decide who is an employee for tax purposes. A tax professional can help if the state and federal answers seem different for you.

What mistakes should I avoid?

• Signing a new "contractor agreement" without reading it. A paper alone does not decide your status, but read before you sign.
• Throwing away 1099 forms or payment records. They are your proof.
• Waiting. Each month you wait can push older pay past the three year limit.
• Ignoring taxes. Unpaid self employment tax can grow.
• Quitting in anger before you get advice.

Questions people ask

I signed a contract that says I am a contractor. Does that settle it? No. Under the ABC test, what happens in real life matters, not just the label.

I am paid in cash. Can I still be an employee? Yes. How you are paid does not decide your status.

Can my boss fire me for asking about this? Asking about your pay or your rights is protected. Being punished for it may be illegal retaliation. You usually have one year to file a retaliation complaint with the Labor Commissioner.

I like being a contractor. Do I have to change? No one forces you to file. If you truly run your own business, the ABC test may show you are a contractor. See How to earn money working for yourself.

Who can help?

Contact them to confirm hours, languages and openings. Being listed here is not a referral or a promise of service.

• California Labor Commissioner: wage claims and retaliation complaints, with phone interpreters. 833-526-4636.
• Legal Aid at Work, Workers' Rights Clinic: free and confidential, for people within its income limits or age 60 and over. East Palo Alto line: (415) 404-9093.
• San Mateo County Office of Labor Standards Enforcement: free, confidential Labor Advice Hotline, 1-866-870-7725.
• Community Legal Services in East Palo Alto: immigration help for low income residents of San Mateo and Santa Clara counties. (650) 326-6440.
• More options: Free help with a work problem in the Bay Area.

Is there a worksheet I can print?

Your work has value, whatever the paperwork calls you. Learn the test, keep your records, and ask for what is fair.