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Audit Legislation FAQs

TDIC’s experts are here to help you decode California workers’ compensation legislation and how it applies to your payroll audit. 

AB 5 and other workers’ compensation legislation 

AB 5 refers to California Assembly Bill 5. This law codifies the “ABC” test by requiring application of the ABC test to determine if workers in California are employees or independent contractors for purposes of: 

  • Labor Code 
  •  Unemployment Insurance Code 
  • Industrial Welfare Commission (IWC) wage order 
  • Workers’ Compensation Insurance  

Under the ABC test, a worker is considered an employee and not an independent contractor unless the hiring entity satisfies all three of the following conditions:  

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;  
  • The worker performs work that is outside the usual course of the hiring entity’s business; 
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.  

The Borello Test is a multifactor test established by the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989). Basically, it requires consideration of all potentially relevant facts where no single factor controls the determination.   
TDIC’s Independent Contractor Questionnaire is modeled after the Borello test, specifically for dentistry.  

Not necessarily. The courts have put weight on different factors depending on the circumstances. For example, where the employer does not control the work details, an employer-employee relationship may be found if (1) the employer retains control over the operation as a whole, (2) the worker’s duties are an integral part of the operation and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative, Inc. v. Workers’ Compensation Appeals Board (1991) 226 Cal.App.3d 1288.)  
For more information, you can visit the California Department of Industrial Relations (DIR) Independent Contractor vs Employee page.

(1) Source: California Dept. of Industrial Relations  

Yes, CDA secured the exception for licensed dentists as an excluded occupation. For dentists, meeting the exception under Labor Code section 2750.3 means that the ABC test does not govern the determination and instead the multifactor Borello test applies.  

AB 5 took effect for workers' compensation purposes on July 1,2020, and applies to policies issued on or after July 1, 2020, as well as policies in force as of July 1, 2020.   
That means that for a worker who experiences a compensable injury on or after July 1, 2020, the ABC test will apply to determine whether the worker is an employee or independent contractor (unless an exemption from the ABC test applies, in which case the Borello test will be used).   

There is no change for licensed dentists. The Borello test will remain in use.  
As of July 1, 2020, all other dental staff, besides dentists, fall under the ABC test.  

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