Prong B is often the most difficult prong to satisfy and the most common reason businesses fail the ABC Test. Under Prong B, a worker can only be classified as an independent contractor if:
"The worker performs work that is outside the usual course of the hiring entity's business."
The Core Question
Ask yourself: Is this worker doing what my business does?
How Courts Interpret "Usual Course"
Courts look at:
- Revenue Generation: Does this work directly generate revenue for the business?
- Customer Perception: Would customers see this as your service?
- Business Model: Is this integral to your business model?
- Regular vs. Occasional: Is this work performed regularly or is it a one-time project?
Industry-by-Industry Analysis
| Business Type | Work That Fails Prong B | Work That Passes Prong B |
|---|---|---|
| Software Company | Software development, QA testing | Office cleaning, legal services, accounting |
| Marketing Agency | Marketing campaigns, design, copywriting | IT support, facilities maintenance |
| Delivery Company | Deliveries, logistics | Vehicle maintenance, HR consulting |
| Restaurant | Cooking, serving | HVAC repair, pest control |
| Law Firm | Legal research, document review | Plumbing, IT infrastructure |
Case Studies
Dynamex Operations West v. Superior Court (2018)
Facts: Dynamex, a delivery company, classified its drivers as independent contractors.
Holding: FAILS Prong B - Delivery drivers perform deliveries, which is the core business of a delivery company.
Lesson: This case established the ABC Test in California and demonstrated that core service providers cannot be contractors.
Example: Tech Startup Using Contract Developers
Scenario: A SaaS startup hires contract developers to build features for their product.
Analysis: FAILS Prong B - Software development is the usual course of a software company's business, regardless of whether developers work remotely or set their own hours.
Example: Same Startup Hiring Photographer
Scenario: The same SaaS startup hires a photographer for team headshots.
Analysis: PASSES Prong B - Photography is not within the usual course of a software company's business.
Creative (But Risky) Workarounds
Some businesses try to structure around Prong B:
1. Subsidiary Structure
Create a separate legal entity that contracts workers. This is risky - courts can pierce corporate veils if the structure is deemed a sham.
2. Redefining Your Business
Some argue their business is "platform" or "marketplace" rather than the underlying service. Courts are increasingly skeptical of this argument (see Uber/Lyft litigation).
3. B2B Exemption
The business-to-business exemption may apply if all 12 criteria are met. See exemptions guide.
Practical Recommendations
- Audit Current Contractors: List all contractors and categorize their work
- Core vs. Non-Core: Identify which work is core to your business
- Consider Reclassification: Convert core-work contractors to employees
- Explore Exemptions: Some professions and B2B relationships are exempt
- Document Everything: Keep records showing contractor's independent business