The advent of ride-sharing apps like Uber and Lyft did more than just revolutionize the way people travel. For better or worse, their “contractor”-based workforces ushered in the era of the gig economy. Today, Uber and its app-based cousins—which include companies like Doordash, Instacart, and even freelance work platforms like Fiverr or TaskRabbit—are embroiled in constantly evolving legal battles over the employment classification of their workforces. But why is it so difficult to determine who is a contractor and who is an employee? More importantly, who does this distinction benefit?
If you need help determining whether you’re an employee or a contractor, reach out to our employment law group for a free case review. Call 1-888-POND-LAW to speak with someone now.
What is the ABC test?
The independent contractor ABC test is a simple rubric of three criteria that determine whether a worker is a contractor or an employee. Importantly, this can dictate the rights and protections they are entitled to under the law. Thirty-three states currently assume a worker is an employee unless they meet all three of these criteria:
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- The contractor must be free from the control and direction of the employer, especially in terms of the execution of the work and the supervision of the worker.
- The contractor performs work that is considered to be outside the scope of the employer’s business.
- The contractor must be engaged in an independently established occupation, business, or trade that is the same as the work they are performing.
Some states use a modified version of the test. Pennsylvania, for example, only adheres to A and C. States that do not use any version of the ABC test generally adhere to the Common Law test, which assumes the worker is a contractor unless the following three criteria are fulfilled:
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- Behavioral control: Does the employer supervise or otherwise control how the worker performs their tasks?
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- Financial control: Does the employer have the right to control the worker’s finances? Does the worker have multiple clients?
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- Relationship between parties: Do the benefits, contracts, and terms of employment otherwise suggest an employer/employee relationship?
What states use the ABC test for employees?
Several states use the full ABC test to determine employee vs. independent contractor status.
These states include Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oregon, Rhode Island, Tennessee, Utah, Vermont, Washington, and West Virginia.
Other states use a modified version of the test which includes conditions A and C. States that use this approach include Colorado, Idaho, Montana, Pennsylvania, Wisconsin, and Wyoming.
A small number of states incorporate flexibility by allowing workers to qualify under conditions A and C or conditions A and B. These states are Oklahoma and Virginia.
What is the ABC test in New Jersey?
New Jersey uses the standard version of the independent contractor ABC test, which means that workers are assumed to be employees unless their employer can prove otherwise, using the three criteria stated above. It assesses whether the employer exerts significant control over the completion of the work, and considers the employers’ scope of business along with whether the contractor is engaged in an independently established trade.
How is worker classification determined in Pennsylvania?
Pennsylvania uses a modified version of the ABC test, which only includes the A and C bullet points. It doesn’t consider whether the work performed is outside the scope of the employer’s business. It only addresses whether the employer is exerting control over the person performing the work, and whether the contractor is engaging in an independently established trade.
Why does the contractor vs. employee distinction matter?
Naturally, a paradigm that assumes that a worker is an employee by default tends to be more worker-friendly. Employees generally receive a bundle of protections that independent contractors do not—things like minimum wage and overtime under wage-and-hour laws, unemployment insurance, workers’ compensation coverage, or access to employer-sponsored benefits. Employees may also have clearer legal rights around workplace policies, scheduling, discipline, and protected leave, depending on the situation and the laws that apply.
Independent contractors, on the other hand, are typically treated as self-employed. That can offer flexibility and autonomy for some workers, but it also shifts significant risk onto the individual—especially when the “independent” label doesn’t match the reality of the job. Contractors usually pay their income taxes directly, are not automatically covered by unemployment or workers’ compensation, and may not be entitled to overtime even when they work long hours. They can also be asked to absorb business expenses (for example, costs related to vehicles, equipment, mileage, uniforms, tools, or software) that an employer might otherwise cover.
What can I do if I’ve been misclassified?
Especially in the current gig economy, real-world working relationships rarely fit neatly into a single box. If you’re being treated like an employee but paid like a contractor, or if your business relies heavily on a contractor workforce and you’re unsure about compliance, a careful review by an employment lawyer can prevent costly consequences down the line.
If you have questions about worker classification, wage-and-hour rights, the independent contractor ABC test, or potential misclassification, the Pond Lehocky team is available to help you understand your options and next steps. Contact us today for a free consultation.
