07.18.2023 | Newsletters

Independent Contractor Test: Not Always Just “ABC”

By Matthew H. Green

As many of you know, in 2020, the California Legislature passed Assembly Bill 5, which codified a strict “ABC” test to evaluate whether a worker is an employee or an independent contractor. However, Assembly Bill 5 also included exemptions from the ABC test for certain industries/jobs; positions falling within one of those exemptions are still evaluated under the prior “Borello” test, which allows more latitude in determining the proper classification.

The legality of allowing those exemptions was questioned in a recent court case. In a win for California employers, the California Court of Appeal in Quinn v. LPL Financial LLC (2023) 91 Cal.App.5th 370, affirmed a trial court finding that Labor Code Section 2783, which lists certain exemptions from the ABC test, was constitutional. The plaintiff in that case was John Quinn, a financial broker who worked for LPL Financial LLC. Mr. Quinn argued he should have been classified as an employee under the ABC test, and therefore LPL Financial LLC was obligated to reimburse him for various business expenses he incurred. While Mr. Quinn believed Assembly Bill 5 violated his equal protection and due process rights, the Court disagreed, finding that registered securities broker-dealers and investment advisors had more skill and bargaining power than the average worker and therefore were less vulnerable to exploitation by misclassification as independent contractors.

Quinn v. LPL Financial LLC should serve as a reminder for all employers to determine which test applies to their workers and to evaluate whether their workers are properly classified.

Related practice team: Labor and Employment

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