Terms.Law โ€บ Employment Law โ€บ AB5 Worker Classification
California Labor Code 2026

AB5 Worker Classification Hub

California's ABC test makes most independent contractor arrangements illegal. This hub provides industry-specific analysis, cost calculators, and compliance tools to help businesses navigate AB5's strict requirements.

3
Prongs to Pass
$25K+
Per-Violation Penalty
30%+
Employee Cost Increase
5+
Interactive Tools
2026 Update: California Labor Commissioner increased enforcement budget. Audit risk is elevated for cleaning, trucking, healthcare staffing, and gig economy companies. Check your industry risk level

The ABC Test: All 3 Prongs Must Pass for IC Status

A
Free from Control
Worker is free from the control and direction of the hiring entity in the performance of work, both under contract and in fact.
B
Outside Usual Course
Worker performs work outside the usual course of the hiring entity's business. This is the killer prong for most businesses.
C
Independent Business
Worker is customarily engaged in an independently established trade, occupation, or business of the same nature.
Industries by Risk Level

Industry-Specific AB5 Analysis

Most industries fail Prong B automatically when contractors perform core services

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HIGH RISK CALCULATOR

Cleaning Services

Cleaning companies almost always fail Prong B. When customers hire "your company" and you dispatch cleaners, that's textbook misclassification. Cost comparison and compliant alternatives.

Prong B: Fails +32% employee cost
View Analysis & Calculator โ†’
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HIGH RISK NEW

Medical Practices & Healthcare

NPs, PAs, medical assistants, and billing staff almost always fail AB5 when working for medical practices. Clinical services = usual course of business. Analysis by role type.

Prong B: Fails (clinical) Workers comp: High
View Healthcare Analysis โ†’
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MEDIUM RISK

Tech Startups & Software

Professional services exemption may apply to engineers, designers, and marketers meeting specific criteria. Analysis of when tech contractors can legally be 1099.

Exemption: Possible $85K+ minimum
View Tech Analysis โ†’
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HIGH RISK

Trucking & Transportation

Owner-operators hauling for motor carriers typically fail AB5. Federal preemption arguments have had limited success. Current litigation status and compliance paths.

Prong B: Fails Litigation ongoing
View Trucking Analysis โ†’
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MEDIUM RISK

Construction & Trades

Licensed contractors may qualify for the business-to-business exemption. Analysis of CSLB requirements, insurance minimums, and proper subcontractor structuring.

B2B Exemption: Possible License required
View Construction Analysis โ†’
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HIGH RISK

Gig Economy & Delivery

Prop 22 provides limited exemption for app-based drivers. Analysis of what's covered, what's not, and the ongoing legal challenges to the exemption.

Prop 22: Partial Non-drivers: Fail
View Gig Economy Analysis โ†’
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Calculators & Interactive Tools

Run your situation through our analyzers and cost calculators

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INTERACTIVE

ABC Test Analyzer

Answer questions about your worker relationship and get a prong-by-prong analysis with risk assessment. Covers all three prongs plus exemption eligibility.

15+ questions Instant results
Run ABC Test Analysis โ†’
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CALCULATOR

IC vs Employee Cost Calculator

Calculate the true cost difference between IC and employee classification. Includes payroll taxes, workers comp, benefits, and compliance costs.

Industry-specific rates Annual projections
Calculate Costs โ†’
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INTERACTIVE

AB5 Exemption Checker

Check if your worker relationship qualifies for one of AB5's exemptions: professional services, B2B, referral agencies, or industry-specific carve-outs.

12+ exemptions covered Requirements checklist
Check Exemptions โ†’
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RISK TOOL

Misclassification Risk Screener

Quick 5-minute assessment of your audit risk. Based on industry, worker count, operational factors, and enforcement priorities.

Risk score 0-100 Action recommendations
Screen Your Risk โ†’
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Compliance Guides & Resources

Deep-dive guides for understanding and complying with AB5

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COMPREHENSIVE

Complete AB5 Compliance Guide

The definitive guide to California worker classification. History, legal framework, ABC test deep-dive, exemptions, enforcement, and compliance strategies.

Full legal analysis Case law citations
Read Full Guide โ†’
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Employee Conversion Roadmap

Step-by-step guide to converting ICs to employees. EDD registration, workers comp, timekeeping, wage & hour compliance, and cost management.

8-step process Checklist included
View Roadmap โ†’
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IC Agreement Requirements

What your IC agreements must include to have any chance of holding up. Required clauses, dangerous language to avoid, and exemption-specific requirements.

Clause-by-clause Red flags listed
View Requirements โ†’
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EDD Audit Defense Guide

What to do when you get an EDD audit notice. Timeline, document requests, interview preparation, settlement strategies, and appeal options.

Defense strategies Settlement guidance
View Audit Guide โ†’

Need Help with AB5 Compliance?

Get a legal review of your worker classification. ABC test analysis, exemption eligibility, compliance recommendations, and California-compliant agreements.

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