Being called a "contractor" doesn't make you one under California law. Since Assembly Bill 5 (AB 5) took effect on January 1, 2020, the default rule in California is that workers are employees - not independent contractors - unless the hiring entity can prove otherwise. That burden is on them, not you.
Bigfirmlit is a non-attorney document preparation service registered under California Business and Professions Code §6400. We prepare self-help legal documents and provide procedural information — we do not provide legal advice and are not a substitute for an attorney. If you need legal representation, consult a licensed California attorney.
Most gig workers, freelancers, and on-demand platform workers have been misclassified. And that misclassification has massive financial consequences: unpaid overtime, no workers' compensation coverage, no paid sick leave, missed meal and rest break premiums, and out-of-pocket expenses that should have been reimbursed. The money adds up fast.
1. What Is AB 5?
AB 5 (codified at Labor Code §2775 et seq.) was enacted effective January 1, 2020. It codified the California Supreme Court's 2018 decision in Dynamex Operations West, Inc. v. Superior Court, which established the ABC test as the standard for determining whether a worker is an employee or an independent contractor.
Before Dynamex and AB 5, California courts used the more flexible multi-factor Borello test, which gave companies room to argue contractor status even when the relationship looked much like employment. AB 5 changed that by creating a statutory presumption of employment and imposing a specific three-part test that companies must pass to classify someone as a contractor.
Under Lab. Code §2775(b), a person providing labor or services for remuneration is presumed to be an employee. The hiring entity bears the burden of proving all three prongs of the ABC test.
2. The ABC Test - All Three Prongs
To lawfully classify a worker as an independent contractor under AB 5, the hiring entity must satisfy all three prongs. Failing even one prong means the worker is an employee under California law.
| Prong | Requirement | What It Means in Practice |
|---|---|---|
| A - Control | Worker is free from control and direction of the hiring entity in connection with the performance of work, both under contract and in fact | The company cannot control how you do your job, only the result |
| B - Outside Usual Course | Worker performs work that is outside the usual course of the hiring entity's business | A plumber hired by a restaurant passes; a driver hired by a ride-share platform likely does not |
| C - Independent Business | Worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed | You must operate an independent business - not just work for one company |
Prong B is the hardest for gig platforms to satisfy. If your work is central to what the company does - driving passengers for a ride-share app, delivering packages for a delivery platform - you are performing work in the usual course of their business. Prong B fails and you are an employee under AB 5.
3. What AB 2257 Changed
AB 2257, enacted in September 2020, amended AB 5 and added a range of occupational exemptions. Exempt categories include:
- Licensed professionals (doctors, lawyers, architects, engineers, accountants)
- Real estate licensees and securities broker-dealers
- Certain performing artists, writers, and photographers for single-engagement work
- Referral agencies under specific conditions
- Certain business-to-business (B2B) relationships meeting strict requirements
These exemptions matter primarily for licensed professionals and certain creative workers. For workers at app-based transportation and delivery platforms, AB 2257 provided no exemption. Those platforms fought their battles separately - through Proposition 22.
4. Proposition 22 and App-Based Workers
In November 2020, California voters passed Proposition 22, which created a separate classification for app-based transportation and delivery drivers working for companies like Uber, Lyft, DoorDash, and Instacart. Prop 22 exempts those workers from AB 5 and provides alternative minimums: a minimum earnings guarantee (120% of minimum wage for engaged time), per-mile expense reimbursements, and health insurance stipends for drivers working more than 15 hours per week.
Prop 22 was challenged in court after passage. In June 2024, the California Court of Appeal upheld Proposition 22 as constitutional. That ruling means the app-based contractor classification remains in effect for transportation network companies (TNCs) and delivery platforms covered by the ballot measure.
Prop 22 is not a victory for gig workers. It means Uber, Lyft, and DoorDash successfully lobbied voters to create a third classification that provides fewer protections than full employee status. Workers covered by Prop 22 do not receive: overtime pay, meal and rest break premiums, paid sick leave under SB 3, employer-paid payroll taxes, workers' compensation, or unemployment insurance.
5. Who Gets AB 5 Protection
AB 5 still applies broadly to workers who are not covered by Prop 22 or an AB 2257 exemption. This includes:
- Workers at companies that route work through apps but are not transportation or delivery TNCs covered by Prop 22
- On-demand gig workers at platforms outside transportation and delivery
- Most workers who receive 1099 forms despite working exclusively or nearly exclusively for one company
- Workers who lack independently established businesses and work only for the hiring entity
- Independent contractors at staffing agencies that do not meet B2B exemption requirements
If you work for a company that calls you a "1099 contractor" but you are not a licensed professional, do not operate a real independent business, and your work is central to the company's operations, you likely have an AB 5 misclassification claim.
6. Financial Consequences of Misclassification
Misclassification is expensive - for you. Workers who should have been classified as employees are denied:
- Overtime pay - 1.5x regular rate for hours over 8 per day or 40 per week (Lab. Code §510)
- Meal and rest break premiums - 1 hour of regular pay per missed meal or rest break (Lab. Code §226.7)
- Expense reimbursements - cell phone, mileage, tools, and other work-related costs (Lab. Code §2802)
- Workers' compensation coverage - no coverage for on-the-job injuries
- Unemployment insurance - no EDD benefits when the work ends
- Paid sick leave - at least 3 days per year under SB 3 (Lab. Code §245.5)
- Employer payroll tax contributions - as a contractor, you pay both sides of self-employment taxes
- Health benefits - no employer-sponsored health insurance contribution
Add up two or three years of unpaid overtime plus meal and rest break premiums plus unreimbursed expenses and the figure can reach tens of thousands of dollars for a single worker.
7. How to Determine If You've Been Misclassified
Apply the ABC test to your own situation:
- Prong A check: Does the company control how you do your work, not just the end result? Do they set schedules, require specific tools, supervise directly, or mandate training? If yes, Prong A may fail for the company.
- Prong B check: Is your work central to what the company sells or does? A content writer for a media company, a driver for a non-Prop-22 platform, or a customer service rep for a software company - all likely fail Prong B for the hiring entity.
- Prong C check: Do you have a real, independently established business? Do you advertise your services, work for multiple clients, and operate independently? Or do you work exclusively for one company with no independent business identity? If the latter, Prong C fails.
If the hiring entity cannot prove all three prongs, you are an employee under California law - regardless of what your contract says.
8. What to Do If You've Been Misclassified
Step 1 - Request Reclassification in Writing
Before filing any external complaint, send a written request for reclassification. This creates a paper trail showing you raised the issue formally, and the company's response becomes part of your record. For a full documentation strategy, see our guide.
Step 2 - File a DLSE Complaint
The California Labor Commissioner (DLSE) handles misclassification-related wage claims including unpaid overtime, expense reimbursements, and meal and rest break premiums. Filing is free and no attorney is required. For a complete walkthrough, see our guide on filing a wage claim with the DLSE.
Step 3 - File an EDD Complaint
If the company failed to pay into unemployment insurance on your behalf, you can file a complaint with the Employment Development Department (EDD). The EDD can assess back taxes and penalties against the employer.
Step 4 - Consider a PAGA Claim
The Private Attorneys General Act (PAGA), Lab. Code §2698 et seq., allows workers to file civil claims on behalf of themselves and other aggrieved employees for Labor Code violations. PAGA penalties are significant. The 1-year statute of limitations runs from the date of each violation. You file directly in civil court after sending a notice to the Labor and Workforce Development Agency (LWDA) - no government agency filing required first.
Step 5 - Evaluate a Civil Lawsuit Under Lab. Code §2775
Under Lab. Code §2775, misclassified workers can sue for the full range of damages resulting from misclassification. This track is more complex and typically benefits from an attorney, but a documented record - written reclassification requests, DLSE filings, and preserved evidence - strengthens any civil case considerably.
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9. Statute of Limitations
Missing a deadline kills an otherwise valid claim. Know your windows:
| Claim Type | Governing Law | Deadline |
|---|---|---|
| Unpaid wages (DLSE) | Lab. Code §203 | 3 years |
| PAGA representative action | Lab. Code §2699.3 | 1 year |
| UCL (unfair business practices) civil claim | Bus. & Prof. Code §17200 | 4 years |
| Expense reimbursement | Lab. Code §2802 | 3 years |
| Written contract breach | CCP §337 | 4 years |
Do not wait. Misclassification often continues for months or years, but claims based on violations outside the limitations window are permanently gone.
10. Common Employer Defenses - and Why They Fail
"You signed a contract calling you a contractor." Contracts cannot override California law. The ABC test is a statutory standard, not a contractual one. Courts have consistently held that a label in a contract does not control the legal analysis under Lab. Code §2775.
"You had flexibility in your schedule." Flexibility in when you work does not satisfy Prong A. The question is whether the company controls how you perform the work - not whether you set your own hours.
"You work for other clients too." Working for multiple clients helps on Prong C, but Prongs A and B must still be satisfied independently. If your work is central to the company's business and Prong B fails, the multi-client argument does not save the company.
"We're a technology platform, not an employer." The "platform not employer" defense was central to pre-AB 5 gig economy litigation. Post-AB 5, California courts have largely rejected it for workers not covered by Prop 22. The ABC test evaluates the reality of the relationship, not the company's preferred framing.
11. Documentation Checklist
Before filing any complaint or demand letter, gather the following:
- All contracts, agreements, or onboarding documents labeling you a contractor
- Pay stubs, invoices, and 1099 forms received
- Records showing the company's control over your work (training materials, rules, required apps, scripts, performance metrics)
- Evidence that your work is central to the company's business (job postings, marketing materials, company website describing what it sells)
- Records of unreimbursed expenses (mileage logs, phone bills, tool receipts)
- Communications showing schedule requirements, performance standards, or disciplinary procedures
- Any prior complaints you made internally (emails to HR, supervisor communications)
- A written timeline of key events with dates
If your situation also involves wrongful termination or retaliation for complaining, preserve those records separately in a personal file outside company systems.
12. Employee vs. Independent Contractor: Rights Comparison
| Protection | Employee | Misclassified "Contractor" |
|---|---|---|
| Overtime pay (over 8 hrs/day or 40 hrs/week) | Yes (Lab. Code §510) | No - must pursue back pay claim |
| Meal and rest break premiums | Yes (Lab. Code §226.7) | No - must pursue back pay claim |
| Expense reimbursements | Yes (Lab. Code §2802) | No - worker absorbs costs personally |
| Workers' compensation | Yes | No |
| Unemployment insurance | Yes | No |
| Paid sick leave (SB 3 minimum) | Yes | No |
| Employer payroll tax contribution | Yes | No - worker pays both sides |
| Final paycheck timing protections | Yes (Lab. Code §201) | No statutory requirement |
| Retaliation protection for wage complaints | Yes (Lab. Code §98.6) | Limited |
| Meal/rest break scheduling rights | Yes (IWC Wage Orders) | No |
13. Frequently Asked Questions
I signed a contract calling me a contractor. Am I stuck?
No. California courts have consistently held that a contractual label cannot override the ABC test. The test is a statutory standard set by the Legislature - companies and workers cannot contract around it. If the ABC test shows you are an employee, you are one, regardless of what the agreement says.
Can I file a complaint while still working there?
Yes. Both the DLSE and PAGA allow you to file while still employed. Filing while employed can also strengthen a retaliation claim if the company takes adverse action against you afterward. Send a written reclassification request first so the company's response is on the record. See our guide on retaliation for complaining for what to watch out for.
What is the fastest path to back pay?
The DLSE (Labor Commissioner) is generally the fastest route for wage-based claims - unpaid overtime, missed meal and rest break premiums, and unreimbursed expenses. Filing is free, the process is accessible to self-represented workers, and the Labor Commissioner has authority to hold hearings and issue binding orders. For complex or high-dollar claims, a PAGA action or civil lawsuit may recover more but takes longer.
Does AB 5 apply to out-of-state companies?
Yes, if the work is performed in California. AB 5 governs the employment relationship as it exists in California - not where the company is incorporated or headquartered. If a California worker performs services in California for an out-of-state company, AB 5 applies to that relationship.
Are Prop 22 workers and non-Prop 22 workers in different situations?
Yes - significantly. Workers at app-based TNCs and delivery platforms covered by Prop 22 are classified as independent contractors by statute under that law, regardless of the ABC test. Those workers have a separate set of minimum benefit requirements under Prop 22 but do not have access to full employee protections. Workers at companies not covered by Prop 22 retain full AB 5 protection, and the ABC test determines their classification.
14. Conclusion
Being labeled a contractor does not make you one. Lab. Code §2775 puts the burden on the hiring entity to prove all three ABC prongs - and most gig and on-demand companies cannot satisfy Prong B or Prong C. If you have been working without overtime pay, expense reimbursements, or workers' compensation coverage that an employee would receive, misclassification may be the reason.
The window to act is not unlimited. PAGA claims carry a 1-year statute of limitations. Wage claims have a 3-year window at the DLSE. Every week of continued misclassification is a week of unpaid wages that may be recoverable - but only if you act before the deadline expires.
Bigfirmlit is a non-attorney, LDA-compliant document preparation service. Everything in this post is general procedural information — not legal advice. For personalized legal guidance, consult a licensed California employment attorney.
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