Why Do Worker Classification Tests Exist?
Defining the difference between an independent contractor and an employee can make or break a company. The difference between the two determines finances, legal, and overall operation. To make sure everyone is on the same page, worker classifications exist. However, different states utilize different tests to best determine their worker classifications. This article talks about: the most common types of worker classification tests, what tests are in certain states, and which states to be aware of with different regulations.
Common Tests Utilized: Common Law Test or ABC Test
Today, the most common tests are the “Common Law Test” and the “ABC Test.” The Common Law test determines whether someone is an employee versus an independent contractor by evaluating and balancing these three criteria: behavioral control, financial control and relationship of the parties involved. For example, if there is training or if a person is receiving insurance from a company, then that person would be considered an employee instead of an independent contractor.
The ABC test evaluates these three criteria: absence of control, business of the worker, and customarily engaged.” For example, if a person has a direct boss, works on someone else’s property (rather than their own), or does not have their own distinguisher of a separate company, then that person would be considered an employee and not an independent contractor. The ABC test is more difficult test to satisfy for independent contractor classification in order to be classified as an independent contractor. The three factors are the most difficult to prove and these elements must be shown to have been satisfied. There is no balancing approach.
Examples Of Some State Tests Each IC Have To Follow
States may use just one of these tests, combination of either test, or a selection from the tests. Depending on the location, these classifications vary. In the western part of the country like Washington, Oregon and California use the ABC test. Mid country states follow primarily the ABC or a variation of that test. For example, Oklahoma is a state that uses A&B or A&C of the ABC test, checking for absence of control, and maybe business of work or customarily engaged. Some east coast states like New York and North and South Carolina use the Common Law test. Each state and their governments vote for these tests.
Understanding Certain States Like California, New York & Massachusetts
Certain states have different regulations based on the governments the state’s operate in. For example, California has Proposition 22 and AB 5, which defines independent contractors regulation. In New York City, the Small Business Forward Executive Order also regulates small businesses. Massachusetts has also brought similarly to Proposition 22 to regulate this worker classification.
Prop 22 & Bill H 1094 “Driver Bill of Rights”
Proposition 22 is the App-Based Drivers As Contractors and Labor Policies Initiative from 2020. This proposition defines the delivery and ride-share industry as independent contractors, and establishing labor and wage policies for related companies. Bill H.1094 is a petition establishing rights also for the delivery and ride-share industry.
How Can DDI Help?
At Delivery Drivers, Inc., we specialize in the last-mile delivery industry. Check out our Locations just to see how many companies we help with daily. In the end, each state tests for different classifications. These tests are always updating. But with Delivery Drivers, Inc., support for determining the most up-to-date and accurate classification is available. Get started by contacting our team to figure out what tests are needed for you and your businesses.