This office does not handle:

  • Unemployment Insurance Benefits (UI)
  • State Disability Issues (SDI)
  • Worker Compensation Issues
  • EDD Overpayments

Over 50 Years In Practice
Over 500 Articles

AB5 AND THE BORELLO TEST – IS IT STILL ALIVE?

By Robert S. Schriebman
2025

Introduction

If the employer treats the worker as an employee, both AB5 and the Borello Test do not enter the equation. The employer has complied automatically with the confusing body of laws relating to who is an employee. But what if the service provider wants to be treated as an independent contractor and the employer agrees? In that event, both AB5 and the Borello Test must be evaluated.

AB5 was supplemented and amended by AB2257. AB2257 has many exceptions to the “ABC” test. In other words, there are relationships that test whether a service provider is truly independent. All tests for all exceptions still apply Borello and, in addition, usually require that there be a written contract establishing the independent contractor relationship. The requirement of a written contract between the parties is very important.

This article will discuss the application of the Borello Test under AB5. Yes, the Borello Test is alive and well under both AB5 and AB2257.

THE BORELLO TEST

The Borello Test is a product of the California Supreme Court. (S. G. Borello & Sons, Inc. V. Department of Industrial Relations 1989) 48 Cal.3d 341. Many factors were set forth in the decision to determine whether a service provider is truly an independent contractor. The primary element in the case was whether the employer had the requisite control over the manner and means of accomplishing the desired result. The control factor may be blatant or indirect. It is not necessary that the element of control actually be exercised. As long as the employer has the legal right to control the worker, that’s enough to call into question the independent contractor status of the service provider. While the control factor has historically been of great importance, there are other factors that come into play under Borello. Let’s take a look at them:

  1. Does the service provider require special education, special training or special skills?
  2. Do both the service provider and the employer truly believe they are creating an independent contractor relationship. This factor is usually ignored by the EDD auditor. Even the existence of a written contract clearly setting forth the intention of the parties may have very little impact on the EDD auditor. No lawyer will ever be able to draft an iron-clad contract that will leave no doubt in the EDD’s mind.
  3. Does the service provider hold himself or herself out to the public to have an occupation or established business distinct from that of the employer?
  4. Does the service provider hire his/her own workers and treat those workers as employees?
  5. The type of occupation. Is the service provider engaged in a recognized independent occupation or profession that is clearly distinct from that of the employer? Does the service provider render the same type of work that employees of the employer perform?
  6. Is the service offered a regular or integral part of the employer’s business? An example of this would be a manufacturing company calling in a plumber or an electrician. Clearly these are long recognized established businesses.
  7. Does the service provider use his/her own tools, equipment or supplies without being reimbursed? It’s not enough that the service provider uses his/her vehicle and pay the usual expenses associated with vehicle ownership. Akin to this question is whether the worker has a substantial investment in the business and has the opportunity to make a profit or to sustain a loss.
  8. Is the type of work usually done under the direction of the employer or by the service provider without supervision?
  9. Is the work provided on a short-term or long-term relationship? Services that are long-lasting in duration usually establish a permanent employer-employee relationship. Again, using the examples of services provided by a plumber or electrician who are retained for one or more short-term tasks.
  10. Does the employer have the right to terminate the relationship at will or is there exposure to a lawsuit for breach of contract?

Both the ABC test and the Borello Test presume the worker to be an employee. The employer has the burden of proof required to establish an independent contractor relationship. Unlike the ABC test, no single factor under the Borello Test will determine worker status. The employer-independent contractor relationship requires an analysis on a case-by-case basis. EDD auditors will always take the position that the worker, treated as an independent contractor, is really an employee in disguise and leave the employer to prove otherwise.

Conclusion

The ABC test is now five years old. I have handled many audits and I have reviewed many Audit Reports. Each report contains an elaborate discussion by the auditor applying the ABC test only to conclude that the service provider was misclassified. Most audit reports use ‘boiler-plate’ language discussing each element of the ABC test and automatically stating how each factor proves an employer-employee relationship. The Borello Test is rarely examined by the EDD auditor. There is much similarity between the Borello Test and the multiple factors historically used by the EDD before the ABC Test was enacted. It is up to the employer to produce as many favorable elements as necessary to prove the service provider is truly an independent contractor. But it is not a game of marbles where one collects the majority of the marbles and is declared the winner. In other words, a majority of the Borello factors in your favor may not win the day.

***

Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners a6502nd the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Web Site Article 820