• LinkedIn
  • Facebook
  • Instagram
  • Youtube
  • (888) got-1099
  • contact@got1099.com
  • 0Shopping Cart
got1099
  • Services
    • Construction
  • About Us
  • Assembly Bill 5 (AB-5)
  • Blog
  • Case Studies
  • FAQs
  • Contact
  • Get Started
  • Menu Menu

Table of Contents

    • Borello vs. ABCs of Contractor Classification
  • The ABC Test vs. the Borello Test
    • What is AB-5?
    • What is the Borello Test?
  • Why is Proper Classification Important?

Borello vs. ABCs of Contractor Classification

The California Employment Development Department (EDD) uses the new Assembly Bill 5’s ABC test to identify worker classification. However, the older Borello Test can also be used in less clear classification circumstances.

When it comes to correctly classifying your workers, how do you know which test to use and when? Let’s dive in.

The ABC Test vs. the Borello Test

Both the ABC test and the Borello test were created with the intention of forming regulations for business owners to follow in order to correctly classify each of their workers between W-2 employees and 1099 workers.

What is AB-5?

Assembly Bill-5, passed January 1st, 2020, set a new rule and standard for classifying workers as either W-2 employees or 1099 independent contractors. While business owners can hire both workers for their business, classifying each individual correctly keeps your business from triggering an EDD audit due to misclassifications. 

The goal of the new AB-5 is to provide more clarity for worker classification than the previous Borello Test provided. The process starts by asking who has the “right of control” of the worker? This essentially asks who has the right to control how or when the worker performs job tasks and shows up.

W-2 employees work pre-determined hours, receive benefits, time off, are taxed on payroll, do not have a set work end date, and perform job tasks. However, it’s the opposite for 1099 employees. They have work flexibility, do not receive benefits or time off, their payments are not pre-taxed, and they have a broader range of work flexibility.

AB-5 California put in place a new worker classification test called the ABCs of worker classification. This test is simpler and only asks business owners three questions to determine classification status. 

Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions:

  1. 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;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

What is the Borello Test?

Before the new Assembly Bill 5 classification guidelines, the Borello test classified workers as either W-2 employees or 1099 independent contractors. This test is less straightforward than the updated AB-5 that includes clearer guidelines under its ABC test. 

Even with the new AB-5 regulations, however, you can still reference the Borello test if there are exemptions, exclusions, or confusion in classifying independent contractors. Workers exempt from the ABC Test are not automatically considered independent contractors and must also meet the Borello factor’s requirements to be considered independent contractors.

EDD provides the full Borello Test worksheet with the following questions to help guide classification:

  1. Do you instruct or supervise the person while he or she is working? 
  2. Can the worker quit or be discharged (fired) at any time?
  3. Is the work being performed part of your regular business?
  4. Does the worker have a separately established business?
  5. Is the worker free to make business decisions that affect his or her ability to profit from the work?
  6. Does the individual have a substantial investment in their job which would subject him or her to the financial risk of loss?
  7. Do you have employees who do the same type of work?
  8. Do you furnish the tools, equipment, or supplies used to perform the work?
  9. Is the work considered unskilled or semi-skilled labor?
  10. Do you provide training for the worker?
  11. Is the worker paid a fixed salary, an hourly wage, or based on a piece-rate basis?
  12. Did the worker previously perform the same or similar services for you as an employee?
  13. Does the worker believe that he or she is an employee?

Answering “yes” to questions 1-3 would provide a strong indication that the worker is an employee. Answering “no” to questions 4-6 would indicate that a worker is not in business for themselves and would likely classify as an employee. Questions 7-13 indicate important factors to be considered.

While answering “yes” to any one of them may indicate that a worker should be classified as an employee, no single factor is enough to determine so independently. 

The full worksheet provided by EDD provides further clarification on certain factors and circumstances.

If completing the provided worksheet does not provide sufficient clarification for employers, EDD offers the ability to request a written ruling by completing a seven-page form called Determination of Employment Work Status. The form supports any business entity looking to determine if a worker is an employee or an independent contractor. 

Click here to read the list of occupational, professional, referral agency, and construction agency exemptions that business owners must be aware of to reference the 13 factors in the Borello test when hiring workers in these fields. 

Why is Proper Classification Important?

EDD takes classification seriously and performs thorough audits because they directly impact payroll taxes—essentially the money the government receives. The agency doesn’t receive proper taxes owed from the business owner or the hired workers when they are misclassified. 

These strict regulations are in place to protect workers. Workers misclassified as 1099 independent contractors, when they are truly W-2 employees, do not receive the same type of benefits, such as employment benefits they are entitled to. Curious what inspired California EDD to create stronger classification criteria? Read this ebook guide to the Dynamex Case that triggered AB-5 here.

For employers looking to quickly verify their worker’s correct classification status, purchase a got1099 report. Our reporting system is quick and simple for you to fill out and get back. Unlike the seven-page handwritten EDD Determination of Employment Work Status, our report takes less time to fill out. We provide detailed information on each individual worker you request verification of, including:

  • EIN
  • SSN
  • Business location
  • Business entity review
  • FBN review 
  • Website and social media checks 
  • Media data
  • Professional license check 
  • Tax license check 

The got1099 report helps give you clear facts to make better classification decisions. The benefit? If we find that you’ve misclassified a worker, you now know the right steps to take to help classify them correctly. Contact us today to learn more about how a got1099 report can help your business.

Before the Dynamex case, the Borello test was used to classify workers. Now, the ABC test is used.

SEARCH

CATEGORIES

FROM THE BLOG

  • Should Materials Be Included in My 1099-Misc?
  • The Labor Shortage Explained
  • How Far Back Can EDD Audit Your Small Business?
  • Can a 1099 Collect Unemployment?
  • Upcoming Changes for the Gig Economy: What’s in Store? 
  • Verification Report
    Verification Report
    $159.00
    Add to cart

LOCATION

La Jolla, CA 92037
o: (888) got-1099 (468-1099)
e: contact@got1099.com

copyright got1099®

copyright got1099?®

copyright Start1099®

CONNECT WITH US

GET AB-5 And CASLB Updates in your inbox


IMPORTANT INFO

Disclaimer
got1099 is a business reporting company providing business analysis reports to companies re: their 1099 independent contractors We do not provide legal advice. Consult with your attorney relating to any legal issues.

© Copyright - got1099 -- -- site design by digitalstoryteller.io - - powered by Enfold WordPress Theme
  • LinkedIn
  • Facebook
  • Instagram
  • Youtube
Prop 22 ExplainedRideshare drivers will automatically be classified as 1099s with Prop 22Dynamex reclassified their W-2s as 1099s, stripping employee benefits. The Supreme Court ruled this unconstitutional and implemented the ABC test.How Dynamex Ruined it for Everybody
Scroll to top

This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.

Accept settings

Cookie and Privacy Settings



How we use cookies

We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

Essential Website Cookies

These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

Google Analytics Cookies

These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.

If you do not want that we track your visit to our site you can disable tracking in your browser here:

Other external services

We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

Google Webfont Settings:

Google Map Settings:

Google reCaptcha Settings:

Vimeo and Youtube video embeds:

Other cookies

The following cookies are also needed - You can choose if you want to allow them:

Privacy Policy

You can read about our cookies and privacy settings in detail on our Privacy Policy Page.

Privacy Policy
Accept settings