California ABC Test & Borello Test Checker
AB5 Independent Contractor Compliance Tool
Check your audit risk in 2 minutes under California AB5 & SB 988. Free & no sign-up required.
What Does This Worker Actually Cost You in California?
A 1099 hire looks cheaper on paper. This calculator shows the real gap between 1099 and W-2 costs under 2026 California rates — and what that gap can turn into if the audit above flagged high risk.
Want the federal check too?
California's ABC test is stricter than the IRS 20-point checklist. Run both before you finalize classification.
Already did the work and still haven't been paid?
Generate a formal SB 988 demand letter — cites the 30-day rule & double damages — and send it today.
ABC Test vs. Borello Test: Which Applies to Your California Contractors?
In California, worker classification is no longer a guessing game. While the IRS uses a 20-point checklist, California strictly enforces the ABC Test established by Assembly Bill 5 (AB5) for most industries.
To classify a worker legally as an independent contractor, a hiring entity must prove all three of the following conditions:
- A (Behavioral Control): The worker is free from the control and direction of the hiring organization in connection with the performance of the work.
- B (Core Business): The worker performs work that is outside the usual course of the hiring entity's business. (This is where most businesses fail compliance.)
- C (Independent Trade): 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 about the Borello Test?
The older Borello standard relies on a multi-factor balancing test (similar to the IRS 20 factors). Today, it only applies to specific statutory exemptions in California (such as licensed real estate agents, certain professional services, or direct salespersons). If your business doesn't fall under these rare exemptions, the strict ABC test rules your contract.
Does the "professional services" exemption cover creative freelancers?
Under California Labor Code § 2778, several creative and consulting roles are explicitly named as "professional services" — including graphic design, marketing involving original creative content, fine art and photography, photography and videography, and freelance writing or content creation. For these roles, the strict ABC test is replaced by the Borello test — but only if the hiring entity can show the worker meets all of the following:
- Maintains a business location separate from the hiring entity (a home office counts)
- Holds a business license or tax registration, and any required professional license
- Can set or negotiate their own rates
- Can set their own hours, outside of project deadlines and reasonable business hours
- Is customarily engaged in the same type of work for other clients
- Regularly exercises discretion and independent judgment in performing the work
Source: California Labor Code § 2778. This exemption list is amended periodically — confirm current statutory language before relying on it for a specific engagement.
Important scope note: qualifying for the Borello test only changes how a worker is classified — it has no bearing on your payment obligations. Even a Borello-exempt professional service provider is still entitled to full SB 988 protections: a written contract for $250+ engagements, a 30-day payment deadline, and double damages for late payment. See below.
How to Avoid AB5 Penalties in California
Avoiding costly AB5 penalties in California centers on one rule: correct worker classification. Misclassification under AB5 and the Freelance Worker Protection Act (SB 988) can trigger devastating fines, including back taxes, wage violations, and statutory damages.
To ensure total compliance, your business must:
- Pass all three prongs of the ABC Test, or qualify for a valid Borello exemption.
- Execute written contracts for any contractor engagement valued at $250 or more.
- Issue full payments within 30 days of completion to satisfy SB 988 requirements.
* Given the complexity of California labor law, always consult a legal professional to review your specific classification decisions.
California Independent Contractor Payment Laws & SB 988
Ensuring your workers are classified correctly is only half the battle; paying them according to California law is the other. Under the Freelance Worker Protection Act (SB 988), California has introduced steep penalties for delayed payments to independent contractors.
If you hire freelance workers in California, you must adhere to these strict guardrails:
- Mandatory Written Contracts: Any contract valued at $250 or more must be in writing, specifying the rate, method, and date of payment.
- 30-Day Payment Deadline: Payments must be made on or before the date specified in the contract, or no later than 30 days after the completion of services if no date is specified.
- Late Payment Penalties: Hiring entities that fail to pay on time can face double damages (2x late payment penalty) plus attorney fees under SB 988.
The audit tool above automatically factors these SB 988 checklist criteria into your result. If it flagged missing contract terms, generate a compliant contract now.
What is the new independent contractor law in California for 2026?
What is the ABC Test in California?+
The ABC Test is a strict three-prong standard used in California to determine whether a worker is an employee or an independent contractor. To classify a worker as an contractor, the hiring entity must prove all three of the following:
- A. The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
- 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.
What is the Borello Test?+
The Borello Test is California's traditional common-law test used for occupations exempted from the ABC Test. Unlike the rigid ABC test, it relies on a "total of the circumstances" approach.
The primary factor is whether the hiring entity has the right to control the manner and means of accomplishing the result desired. It also considers secondary factors such as:
- Whether the worker is engaged in a distinct occupation or business.
- Whether the work is usually done under the direction of a principal or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the principal or the worker supplies the instrumentalities, tools, and the place of work.
- The length of time for which the services are to be performed.
Does California still use the IRS 20-point checklist?+
The IRS 20-factor test is still used for federal tax auditing. However, for state labor laws, payroll taxes (EDD), and worker's compensation, California mandates the much stricter ABC test. Meeting IRS standards does not mean you are compliant with California AB5. If you want to check the federal side too, run our free IRS 20-point classification check.
Can a contract waive California AB5 rules?+
No. You cannot contract your way out of California labor laws. Even if a contractor signs an agreement stating they want to be a 1099 independent worker, the State of California will look past the contract and audit the actual economic reality of the working relationship.
What happens if I misclassify a worker in California?+
The penalties are severe. Civil penalties range from $5,000 to $25,000 per violation for willful misclassification, plus retroactive payments for unpaid overtime, meal breaks, and severe back taxes to the Employment Development Department (EDD). See what that looks like in dollars for your specific case with the 1099 vs. W-2 true cost calculator above. If your audit result above flagged high risk, run the IRS 20-point checklist next, then generate a compliant written contract before continuing the engagement.
Next steps once you know your risk level
Contract Generator
Build an SB 988 compliant freelance agreement in 60 seconds.
Demand Letter Generator
Already unpaid? Send a formal SB 988 demand letter today.
Penalty Calculator
Calculate double-damages exposure for a late payment.
Hiring outside California? Check rules for other states.
Independent Contractor Laws by State →Not sure yet? Run the audit above.
Two minutes tells you which test applies and whether your contract is exposed — before it becomes a $25,000 problem.
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