Updated September 26, 2023
A California independent contractor agreement is a contract that defines a client’s expectations when employing the services of an individual working as a contractor. The client can specify the services they require as well as the designated wage, completion date, termination procedures, and other matters which help establish the working relationship between both parties.
It is important to note that improperly classifying a worker as an “independent contractor” can be dangerous for the hiring party as they may fail to provide sufficient insurance coverage for the worker while being liable for expenses should an accident occur. Drafting a contract agreement supports the contractor’s claim to independent status and reduces the risk of operating under the laws governing standard employees.
New Rules (“ABC Test”)
On April 30, 2018, the California Supreme Court ruled that the previous Employment Determination Guide, as recommended by the California Employment Development Dept., is no longer applicable when determining an individual is an employee or a contractor.[1][2] The court ruled that all individuals working for pay are employees unless a new “ABC Test” is applied to prove otherwise:
A – That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;
B – That the worker performs work that that is outside the usual course of the hiring entity’s business; and
C – That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Note that all three (3) of the above-mentioned conditions must be applied or the individual is considered an employee under California law.