PART 1 OF 4: The ABC Test and Who It Covers

California's default standard for classifying workers, and how it applies in healthcare.

Few compliance questions carry more financial risk for a California healthcare practice than worker classification. Treating a provider as an independent contractor when the law considers that person an employee can generate years of back wages, taxes, and penalties. This article explains the standard California applies and how it operates in a healthcare setting.

The ABC test

Following the California Supreme Court's Dynamex decision and the Legislature's enactment of Assembly Bill 5, California presumes a worker is an employee unless the hiring entity proves all three prongs of the ABC test. All three must be satisfied; failing any one makes the worker an employee.

• Prong A — Freedom from control. The worker must be free from the control and direction of the hiring entity in performing the work, both under the contract and in fact.

• Prong B — Outside the usual course of business. The work performed must be outside the usual course of the hiring entity's business. This is frequently the decisive prong in healthcare.

• Prong C — Independently established trade. The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The Difficulty of Prong B in healthcare

A medical or dental practice exists to deliver clinical care. When a practice engages a physician, dentist, hygienist, or therapist to provide that same clinical care to its patients, the work sits squarely within the practice's usual course of business. That reality makes Prong B hard to satisfy for most treating providers, regardless of how the parties label the relationship.

Exemptions and the Borello standard

Assembly Bill 5 and later amendments carved out numerous occupations and business relationships from the ABC test. Where an exemption applies, classification is analyzed under the older, multi-factor Borello standard, which weighs the right to control along with a range of secondary factors. Certain licensed professionals and specified business-to-business relationships may fall within these exemptions, but the requirements are detailed and must be met in substance.

The label does not control

A written agreement calling someone an independent contractor, a Form 1099, or the worker's own preference does not determine classification. Courts and agencies look at the actual working relationship. Documentation matters, but only as evidence of what genuinely occurs.

How West Coast Health Law Can Help

We advise California healthcare practices on worker classification — analyzing whether the ABC test or a Borello exemption applies, and structuring provider relationships that reflect the law rather than the label.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every practice is different; consult a qualified attorney about your specific circumstances.