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What is the difference between an Employee and Independent Contractor?

A worker is considered an employee unless the individual is contractor and performs work outside the employer's usual business.

Under current state law, a worker is considered an employee and not an independent contractor unless the employer meets all three of the following conditions:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • The worker performs work that is outside the usual course of the hiring entity’s business; and
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Sometimes, the state refers to these conditions as the ABC test, as there are only requirements to fulfill compared with previous independent contractor definitions. 

For further clarification on how to determine the status of your new hire, visit the Department of Industrial Relations and the Employment Development Department's respective websites.