States Using the ABC Test for Independent Contractors

The ABC test is a strict standard used to classify workers as independent contractors or employees. While California is the most prominent state to codify the ABC test for general worker classification, several other states have explored or implemented ABC-style frameworks in specific contexts, industries, or proposed reforms. This article explains what the ABC test is, where it is currently used, and how it differs across jurisdictions.

What The ABC Test Is

The ABC test is a three-pronged test used to determine whether a worker is an independent contractor. A worker is generally considered an employee unless all three conditions are met:

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

If any one of these conditions is not satisfied, the worker is typically treated as an employee. The ABC test is often more employer-friendly than multi-factor tests, but it can dramatically affect payroll taxes, benefits, liabilities, and worker rights.

States Currently Applying The ABC Test

The following sections summarize where the ABC test is in force or being applied, as well as notable nuances. Readers should verify current statutes or court interpretations, as laws can evolve quickly in this area.

California

What applies: California remains the benchmark for the ABC test, codified in AB 5 and subsequently refined by legislative actions and court decisions. The test governs general worker classification across many industries and is the basis for many wage and hour, tax, and benefits considerations.

Key implications: Misclassifying workers as independent contractors can trigger penalties, back wages, tax liabilities, and compliance obligations for employers. Some professions and contracts have established exemptions or exemptions by industry, but many gig economy roles face heightened scrutiny.

New York

What applies: New York has pursued ABC-style considerations in certain contexts, especially where specific industries or sectors are targeted by legislation or regulatory guidance. The standard in practice often follows state-specific interpretations or hybrid tests that incorporate ABC-like elements.

Key implications: In practice, New York may treat many workers as employees in regulated sectors or under public policy shifts, with attention to control, the nature of work, and the worker’s business independence.

New Jersey

What applies: New Jersey has explored worker classification reforms and has considered frameworks that resemble the ABC approach in certain industries or under specific statutes. The state’s general misclassification standard remains grounded in traditional common-law tests, but targeted guidance and legislation have touched on ABC-like criteria.

Key implications: Employers should monitor updates to New Jersey rules, especially in sectors with high misclassification risk and in any proposed bills that adopt ABC-style analysis.

Virginia

What applies: Virginia has discussed reforms and proposed measures that incorporate ABC-style concepts in particular contexts or pilot areas. Rather than a blanket statewide adoption of the ABC test, Virginia’s developments have focused on targeted applications and industry-specific guidance.

Key implications: For employers in Virginia, the practical impact depends on final enacted provisions and administrative guidance for the relevant sectors.

Other States With ABC-Style Considerations

Beyond California, several states have displayed interest in ABC-like criteria through proposed legislation, regulatory actions, or industry-specific guidelines. Examples commonly discussed include:

• Industry-specific reforms in fields with high independent contractor use, where policymakers seek greater clarity on when workers must be treated as employees.
• Proposals that resemble the ABC test in labor-law updates, especially in gig economy contexts or sectors facing stringent misclassification concerns.
• Judicial interpretations or state administrative rulings that adopt ABC-like reasoning for particular misclassification disputes.

Note: These efforts vary by state and often do not create a universal, statewide ABC test like California’s AB 5. Employers should look for updates in the relevant state’s labor code, labor department advisories, and court decisions.

Practical Implications for Employers

When evaluating worker classifications, employers in states considering or applying ABC-style standards should:

• Audit roles and contracts: Review job descriptions, control measures, and the nature of the work to determine if the ABC criteria are satisfied.
• Document independence: Maintain evidence of independent business activities, client relationships, and non-core business activities that demonstrate independent work streams.
• Consult legal counsel: Seek state-specific guidance, as interpretations can differ, and exemptions may exist for certain industries or contract types.
• Prepare for updates: Stay informed about proposed bills, regulations, or court rulings that could shift classifications in your state.

How To Stay Updated

Given the evolving landscape, it is essential to monitor official state resources and reputable legal analyses. Useful sources include state department of labor pages, state legislature websites, and trusted employment law firms that publish state-by-state guides and updates on independent contractor classifications.

Key Takeaways

California remains the primary state with a formal ABC test for general classifications. Other states are actively considering or applying ABC-style concepts in limited contexts or through proposed reforms, not as uniform statewide rules. Employers should assess each state’s current rules, seek legal guidance, and implement robust classification practices to mitigate risk.