Explaining How the Borello Test Relates to Worker Classification
Employment law is complicated. Nothing better encapsulates this than the Borello test, a long series of questions that, depending on what business you’re in and assuming that you’re addressing a situation where the ABC test does not apply, determines whether a worker may be classified as an independent contractor. Different parts of it are emphasized depending on the judge reviewing your case, making it a vague and uncertain system of classification. If you’ve ever started to look through the Borello test, you may have been tempted to flip a coin and hope that you don’t get audited. But worker classification is too important to leave to chance and OOTB is here to help!
In this installment of Ask OOTB, we address your most frequently asked questions about the Borello Test:
Question #1: What is the Borello test?
Question #2: How does an independent contractor pass the Borello test?
Question #3: Did Prop 22 and Assembly Bill 2257 make producers, photographers, editors, and fine artists exempt from AB5? How do I know if workers in these professions should be considered employees or independent contractors?
Question #4: How does the ABC test compare to the Borello test?
But first, some quick housekeeping:
Ask OOTB! is an ongoing series in which we share some of the most commonly asked questions that we receive, along with relevant information that can help you better understand all things payroll. If you have a question that you would like us to tackle, please submit it to us here.
And an important note: The information provided in this article does not, and is not intended to, constitute legal, tax, or financial advice. All information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. We highly recommend that you seek the advice of an attorney or tax professional rather than relying solely on the information provided herein.
Question #1: What is the Borello test?
The Borello test is a multifactor test established by the California Supreme Court that helps determine whether a worker is an independent contractor or an employee. All factors must be considered and no single factor determines classification. Additionally, all of the factors of this test are considered at the discretion of the judge reviewing the claim. There are no guidelines or certainty when utilizing the Borello test. The ambiguity of the Borello test helped lead to the three-part, more transparent ABC test.
However, according to the California Department of Industrial Relations, there are certain professions and industries in which the Borello test must be used.
Question #2: So how does an independent contractor pass the Borello test?
According to the above article on CA.gov, under Borello, a worker is classified based on whether the hiring entity has “all necessary control over the manner and means” of obtaining desired results, even if this control is “not direct or actually exercised.”
To determine whether the potential employer has this control, the following questions about the worker’s job description must be considered:
Is the worker performing services engaged in an occupation or business distinct from that of the potential employer?
Is the work part of the potential employer’s regular business?
Who supplies the tools needed to do the job? Who provides the workplace? Is it the potential employer, or the worker?
Has the worker put money into the business? Do they buy their own equipment or tools?
Does the worker’s job require a special skill?
What kind of job is it? Is the work usually done under the potential employer’s direction or without supervision?
Does the worker have an opportunity for profit or loss depending on their managerial skills?
What is the length of time for which the services are to be performed?
How permanent is the working relationship?
What is the method of payment? Is the worker paid hourly or per job/project completed?
Does the worker hire their own employees?
Does the potential employer have a right to fire the worker at will?
Do the potential employer and the worker believe they are creating an employer-employee relationship? Please note that while this may be relevant, the legal determination of employment status is NOT based on whether the parties believe they have an employer-employee relationship.
Here’s where it gets a little dicey. The way these questions are interpreted depends on the judge who reviews them. If the judge decides that the answers to the above questions indicate that the worker entirely controls their work and the way it is done, then the worker is considered an independent contractor. If the judge decides that the combined answers to these questions indicate that the potential employer controls the work and the way it is done, the worker is considered an employee. Essentially, if a potential employer compensates someone as an independent contractor, the potential employer is leaving themselves open to a lawsuit and all of the time and money associated with a lawsuit, all to get to a decision for which the outcome is not certain.
Question #3: Did Prop 22 and Assembly Bill 2257 make producers, photographers, editors, and fine artists exempt from AB5? How do I know if workers in these professions should be considered employees or independent contractors?
Prop 22 was a California ballot initiative that passed in the November 2020 election. It defined app-based transportation and delivery drivers as independent contractors and adopted labor and wage policies specific to these drivers and companies. It does not apply to other project-based workers.
With AB 2257, California enacted changes to the original verbiage of AB5, expanding the scope and revising the list of businesses that can use the Borello test to determine worker classification rather than the more strict ABC test. The Borello test becomes the guide for determining classification when a profession is exempt from the ABC test. Exemption from ABC does not mean automatic classification as an Independent Contractor.
Question #4: How does the ABC test compare to the Borello test?
Both the Borello test and the ABC test assume that the worker is an employee and the hiring entity must prove, based on the test, that the worker is an independent contractor. The ABC test was created through legislative action to make it easier for businesses and workers to determine, in advance, whether a worker is an independent contractor or an employee. The ABC test is a three-part test in which if the potential employer answers “No” to any of the three questions, the worker is considered an employee.
The Borello test has many more questions. All the questions must be considered together, and the significance or weight of each is determined by a judge. In other words, it's much more vague.
If you want more information about the ABC test, we recently did a post that explains each part of the test: Explaining the A, B, and C of AB5’s ABC Test
We hope you’ve learned something useful from this installment of our Ask OOTB! Series. If you have a question that you would like us to tackle in a future installment, please send it our way by submitting it here.
Sources:
California Department of Industrial Relations (2019). Independent contractor versus employee. https://www.dir.ca.gov/dlse/faq_independentcontractor.htm