Washington State Considers ABC Test for Employee Status

Today, the Washington State legislature holds hearings in the labor committees of both houses, to consider bills to address the issues raised by contract work.

Contracted work is an often overlooked driver of eroding labor standards, rising income and wealth inequality, persistent structural racism and occupational segregation, and the shifting of power away from workers and toward corporations. Many industries in which people of color are overrepresented— sectors like janitorial, landscaping, security guards, home care, and others—are characterized by the widespread use of independent contractors; these contracted jobs offer no social insurance protections or even a minimum wage.

The bills being considered in Washington State (HB 1515 and SB 5513) do the following:

• Enact the broad “ABC test” across most of Washington State’s labor laws;
• Give workers a right of action to challenge misclassification, and give state agencies the power to investigate and enforce the new law.

The so-called “ABC test” is a broad test for employee status that presumes that workers are employees unless they: (A) are free from control by the putative employer; (B) are doing work that is outside the usual course of business of the putative employer; and (C) are engaged in an independently established business.

The test addresses the core issues that differentiate an “employee” from an “independent contractor” and affords employee status in a range of industries where businesses—by calling workers “independent contractors”—have relieved themselves of having to comply with important labor standards like minimum wage and overtime pay, health and safety and anti-discrimination protections, and from paying payroll taxes like unemployment insurance and workers’ compensation. The practice pushes costs and risks downstream onto workers, while sending profits upstream to businesses (often big businesses). It disadvantages businesses that play by the rules and robs state and federal social insurance systems of revenue that provides social protections to all of us.

The so-called “ABC test” is a broad test for employee status that presumes that workers are employees unless they: (A) are free from control by the putative employer; (B) are doing work that is outside the usual course of business of the putative employer; and (C) are engaged in an independently established business.

The ABC test is broad and inclusive, but it is nothing new: Four states, including California, New Jersey, Massachusetts, and Connecticut, already use the test in their wage and hour laws. About half the states, including Washington, use some version of it in their unemployment laws, and some 10 states apply it broadly to labor laws within a particular sector, typically construction or landscaping.

The new test will clarify and harmonize Washington State laws, reward businesses that are complying with the law by creating a level playing field for them, and ensure that state social insurance programs can collect the payroll taxes that are due. It also opens the door for creative solutions that will reduce the disparity between true employees and true independent contractors.