Q: What is/was the Borello test for independent contractors?
Learn how to classify independent contractors.
The Borello test is a requirement list outlining the qualifications of whether a worker could be classified as an independent contractor versus a full-time employee. It was the standard for classifying workers in the state of California before the ABC test.
Under Borello, this primary test was known as the “right to control” test, determining whether the hiring entity controlled the manner and means of accomplishing the desired result by the person providing services. If it could be proven that the hiring entity had the “right to control,” the worker was deemed an employee by this standard.
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The factors of the Borello test are as follows:
- Whether the person performing work is engaged in an occupation or business that is distinct from that of the company;
- Whether the work is part of the company’s regular business;
- Whether the company or the worker supplies the equipment, tools, and the place for the person doing the work;
- The worker’s financial investment in the equipment or materials required to perform the work;
- The skill required in the particular occupation;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the company’s direction or by a specialist without supervision;
- The worker’s opportunity for profit or loss depending on his or her own managerial skill (a potential for profit does not include bonuses);
- How long the services are to be performed;
- The degree of permanence of the working relationship;
- The payment method, whether by time or by the job; and
- Whether the parties believe they are creating an employer/employee relationship.
How does the Borello Test differ from the ABC Test?
The main point of difference between the Borello and ABC tests is the Borello test must prove control of the process and work by the hiring entity whereas the ABC test provides a predictable set of standards under the presumption that workers are employees. Under the ABC test, the hiring entity’s right to control is not the most important factor in determining whether an independent contractor relationship, but only one of three required factors.
Although the former Borello test had a greater number of requirements, the ABC test is actually more rigorous for hiring entities with all three prongs required to prove the independent contractor status of workers.
Download Liquid’s Employee (W2) versus Independent Contractor (1099) Compliance Checklist as a handy reference when evaluating your relationships with freelancers.
Although the ABC test supercedes Borello in most cases, Borello is still in use (when California AB5 is inapplicable or when exemptions apply). So it’s important to understand the requirements of Borello.
It is up to the employer to prove that each independent contractor is classified properly. Liquid can help manage your independent contractor team, click here to learn how.
Category: Compliance Ask Liquid Industry Trends
Updated: December 5, 2019
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.