What Is California Labor Code §2775 (The Dynamex / AB 5 ABC Test)?

(b)(1) For purposes of this code and the Unemployment Insurance Code, and for the purposes of wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied: (A) The person 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. (B) The person performs work that is outside the usual course of the hiring entity's business. (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

What does Labor Code 2775 establish?

Labor Code 2775 shifts the burden of proof to the hiring entity. The hiring entity must prove the worker is a contractor. Employee status is the legal default in California under this rule.

Labor Code 2775 codifies the ABC test from the Dynamex decision and AB 5. A worker providing labor for remuneration is presumed an employee. The hiring entity must prove all three prongs to rebut that presumption. Failing even one prong means the worker is an employee. Employees are entitled to workers' comp coverage under Labor Code 3351.

Eman Yazdchi is a Certified Specialist in workers' compensation law, certified by the California Board of Legal Specialization, State Bar of California. He applies the ABC test on every misclassification file at Yazdchi Law.

What is Prong A under Labor Code 2775?

Prong A requires the hiring entity to prove the worker is free from control under both the contract and in actual practice. Setting hours, providing tools, or requiring specific methods defeats Prong A.

A hiring entity that controls how work is done, not just the result, fails Prong A. Setting hours fails it. Requiring a specific method fails it. Requiring exclusivity fails it. Providing the worksite or tools fails it. An entity that tells the worker what to do and how to do it is an employer under Labor Code 2775, regardless of what the contract says.

What is Prong B under Labor Code 2775?

Prong B requires the work to fall outside the hiring entity's usual course of business. A delivery driver for a delivery company fails Prong B. A plumber hired by a software company passes it.

Prong B is the hardest for gig-economy platforms to satisfy. A delivery platform's core business is delivery. A driver for that platform is inside the usual course of business. Prong B fails. The driver is an employee. In contrast, a plumber called to a software company for a one-time repair performs work outside the software company's usual business. Prong B passes for the plumber.

What is Prong C under Labor Code 2775?

Prong C requires the worker to be independently in business in the same trade. A freelancer with multiple clients and business registration may pass. A single-platform gig worker who works only for one app typically fails.

The worker must actually run an independent business. That means separate clients, business registration, their own capital investment, and marketing. A worker who works exclusively for one platform with no independent business operation fails Prong C. The platform is the employer under Labor Code 2775.

How does Labor Code 2775 connect to workers' comp coverage?

Failing any single prong means the worker is an employee entitled to full workers' comp coverage. The employer must carry insurance under Labor Code 3700. A mislabeled 1099 worker who is injured has a comp claim.

Under Labor Code 3351, employees are covered regardless of immigration status. Under Labor Code 3700, the employer must carry comp insurance for all employees. A worker mislabeled as an independent contractor who fails any prong of the Labor Code 2775 ABC test is an employee. If injured, that worker can file a comp claim. The employer is treated as uninsured if no policy covers the worker.

Related: California workers' comp pillar · Labor Code 2810 explainer.

Eman Yazdchi is a Certified Specialist in workers' compensation law, certified by the California Board of Legal Specialization, State Bar of California. Yazdchi Law serves injured workers throughout Greater Los Angeles. We appear at the WCAB in Van Nuys, Los Angeles, Long Beach, Pomona, San Bernardino, Riverside, and Oxnard. Call (661) 273-1780 for a free case review.