• Brooke Winter

Are YOU an Independent Contractor? *Part 2

Updated: Jan 16, 2019

If you are still confused after reading through the ABC Three-Pronged Test, you’re not alone.

Business groups are most concerned about the B pronged factor of the test. They believe it could make independent contracting nearly impossible, because the “usual course” of a company’s business — its core practices — could be interpreted so broadly.

Let’s talk about the example use by the Supreme Court for the “B prong test”. If a CPA firm hires a plumber to fix a sink, the plumber would not be considered and employee of the CPA firm and could be classified as an independent contractor. The firm doesn't care what tools the plumber uses, it trusts the worker to get the job done, and it is not in the business of plumbing. However, a plumbing company would likely have a problem hiring a plumber as an independent contractor—even if the worker used his or her own tools and worked for other businesses.

Organizations cannot use independent contractors indiscriminately to avoid the tax, equal employment opportunity and other legal requirements applicable to employees. This is extremely risky and could destroy your business; don’t cut corners.

An employer should consult with an HR professional and consider ALL of the factors in deciding whether a staffing need should be met by an independent contractor or an employee.

Some common situations when independent contractors may be appropriate include:

  • Projects of short or specific duration.

  • Where specialized knowledge or experience is needed for a specific complex project.

  • Pressing circumstances such as meeting needs when an employee goes on an extended leave of absence.

Classifying a worker as an independent contractor should always be an informed and genuine business decision, not a ploy to avoid the employer's obligations to employees. Misclassification of an individual as an independent contractor can be very risky for your business and should be taken seriously.

Where do we go from here?

Cases have begun to roll in that will determine legal precedence around this issue. For example, in January 2019 Duffey v. Tender Heart Home Care Agency found that an in-home caregiver should be classified as an employee and not an independent contractor. For those unhappy with the new law, there is currently a bill proposed by Republican Assembly Member Melissa Melendez, California Assembly Bill No. 71 , which would, among other things, add a new section to the California Labor Code organizing the factors to be used to determine the status of an employee which could bring clarity to the vagueness of the ABC test.

Part of the issue is that because this a relatively new piece of legislation, there is almost no legal precedence to use. We are in the unfortunate “wait-and-see” time period that follows after the initial implementation of a new piece of legislation. Large companies will begin making changes in their staffing classifications and court cases will begin to roll out what will determine legal precedence going forward and will establish clear boundaries around the interpretation of the law.

1) Do your research. There are a lot of great articles out there by employment lawyers who are hard at work dissecting this new test. I have included links to some of these articles at the bottom of this blog.

2) Be prepared to answer for the decision you make. Why did you decide to classify your employee as an employee instead of an independent contractor? Why did you decide they qualified to be classified as an independent contractor? Give a reason for each prong of why they do or not meet the qualifications of the test and DOCUMENT IT; show that you took reasonable steps and due diligence in make the right choice.