The ABC Test is applied differently at each state level. In looking at the version applied in California it is primarily viewed as much more restrictive. Under the codified Assembly Bill 5 (AB 5) the following factors must be met to affirm a W2 vs. independent contractor relationship.
- A: The worker is free from the control and direction of the hiring entity in connection with the work’s performance, both under the contract for the performance of the work and in fact.
- B: The worker performs work that is outside the usual course of the hiring entity’s business.
- C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
It’s part B of the ABC test that affects you. Part B makes it nearly impossible for independent drivers to work for a transportation company in California. Again, California is unique, however, other states are getting on board with more strict definitions favoring a move to more W2 employee relationships.
How Do We Help?
We know you’re wondering what to do about this. We have the answer. When you partner with TLC, we become the employer of record for the drivers who work for you. Because we are the employer of record, you’re in the clear. We are a full-service administrative employer, not a transportation company. This means you comply with the ABC classification requirement when you work with us. We also make sure you follow all other labor laws and regulations —no matter what state you are in. We have years of experience at the state and federal levels. It’s peace of mind you can’t get doing it all on your own.
AB5 In California
You’ve probably heard about AB5 in California. AB5 (California Assembly Bill 5) requires companies to reclassify many independent contractors as employees. The U.S. Supreme Court recently refused to hear a challenge to AB5 from the California Trucking Association. There may be other challenges, but the ruling could mean the end of the owner-operator model in the state. TLC Companies can help you figure out AB5 and other confusing regulations and rules.