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It doesn't apply to workers outside of California, even if the employer is based in California. As a result of AB5, many types of workers in California who had previously been classified as ICs must be classified as employees and are entitled to employee benefits and protections.

California isn't the only state to rely on the ABC test. The following states use the ABC test to determine if a worker is an independent contractor or an employee: Alaska. California.

ABC states include Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Kansa, Louisiana, Maine, Maryland, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oregon, Tennessee, Utah, Vermont, Washington, and West Virginia.

When deciding whether you can safely treat a worker as an independent contractor, there are two separate tests you should consider: The common law test; and The reasonable basis test. The common law test: IRS examiners use the 20-factor common law test to measure how much control you have over the worker.

The more the worker has invested in their own equipment, training, and certification, the more likely the IRS will agree to their independent contractor status. Exclusivity of employment: Here the IRS will look at whether the worker provides services exclusively for the business in question.

The difference between an employee and a subcontractor depends on your right to direct and control the worker. In determining the employment tax status of a worker, the IRS considers three categories of evidence: Behavioral control, • Financial control, and • Relationship of the parties.

The proposed rule emphasizes that the critical question is whether the worker performs work that is central to the employer's business, not whether the worker possesses unique qualities that “render them indispensable as an individual.” For example, an operator who is one of hundreds or thousands of operators at a call ...

The law further states that independent contractor status is evidenced if the worker: (1) has a substantial investment in the business other than personal services, (2) purports to be in business for himself or herself, (3) receives compensation by project rather than by time, (4) has control over the time and place ...

The IRS considers three categories when classifying independent contractors: Behavioral Control. Financial Control. Type of Relationship.

The law further states that independent contractor status is evidenced if the worker: (1) has a substantial investment in the business other than personal services, (2) purports to be in business for himself or herself, (3) receives compensation by project rather than by time, (4) has control over the time and place ...

To foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

The purpose of the FLSA was to facilitate better working conditions by establishing federal standards for minimum wages, overtime pay, child labor and employer recordkeeping. The FLSA's impact is far-reaching, affecting employers and full-time and part-time workers in the public and private sectors.

Thirty-three states, most notably California, and the US Department of Labor (DOL) rely on the ABC Test to classify workers. However, the use of the ABC test varies by state — many states do not use all three prongs of the test. To classify a worker as an independent contractor, each mandated prong must be satisfied.

You should consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.

For the employee, the company withholds income tax, Social Security, and Medicare from wages paid. For the independent contractor, the company does not withhold taxes. Employment and labor laws also do not apply to independent contractors.