ABC test
The ABC test is a state law standard: a person you pay for services is your employee unless you prove all three conditions.
- LAW
- State law, e.g. California Labor Code §2775
- THE TESTS
- Control, usual course of business, independent trade
- THRESHOLD
- All three parts, proven by you
- WATCH FOR
- Treating federal contractor status as settling state status
The test starts from a presumption that the person is your employee. You overcome it only by proving all three parts, commonly labeled A, B, and C. Failing any single part makes the person your employee under that state’s test. A written contract calling the person a contractor does not change that. States that adopt the test use it mainly for wage and hour law, paid leave, and unemployment insurance. The IRS does not use it for federal employment tax.
What must you prove?
You carry the burden on every part. Part A looks at the contract and at what happens in practice.
| PART | WHAT YOU MUST PROVE |
|---|---|
| A: Control | The person is free from your control and direction in performing the work, under the contract and in fact |
| B: Outside your business | The work is outside the usual course of your business, such as an outside plumber fixing a leak at a retail store |
| C: Independent trade | The person is customarily engaged in an independently established trade, occupation, or business of the same nature as the work |
How does California apply it?
California adopted the test through Assembly Bill 5, effective 2020. Because the test depends on the state and the law at issue, check both for each person you pay.
| SITUATION | TEST THAT APPLIES |
|---|---|
| The Labor Code, the Unemployment Insurance Code, and wage orders | ABC test |
| Exempt occupations, such as licensed physicians, attorneys, and insurance professionals | Borello test |
| A qualifying business-to-business relationship, with a written contract naming the payment | Borello test |
How does it compare with the federal tests?
A person can be a properly classified contractor for federal tax. The same job can still fail a state’s ABC test for unemployment insurance. The DOL does not apply its 2024 rule in investigations; it remains in effect for private FLSAFLSA. The Fair Labor Standards Act (FLSA) is the federal law setting minimum-wage, overtime, recordkeeping, and youth employment standards for covered employment.Click to open the term suits.
| TEST | USED FOR | WHAT IT ASKS |
|---|---|---|
| ABC test | State wage and hour, paid leave, unemployment insurance | Can you prove all three parts? |
| IRS common-law rules | Federal employment tax | Do you control what is done and how, or only the result? |
| DOL economic reality | Federal wage and hour law (FLSA) | Is the person economically dependent on you, or in business for themselves? |
Frequently asked
- California Labor Code §2775
- Frequently Asked Questions on AB 5
- Independent contractor (self-employed) or employee?
- Field Assistance Bulletin No. 2025-1, FLSA Independent Contractor Misclassification Enforcement Guidance
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.