Glossary · Compliance
AB5 (California Independent Contractor Law)
California statute codifying the ABC test for distinguishing employees from independent contractors, with limited statutory exemptions.
AB5 codifies the strict three-prong ABC test for worker classification in California. Workers are presumed to be employees unless the hiring entity demonstrates all three prongs (control, outside the usual course of business, and independent trade).
AB5 has been the model for similar legislation in other states. California-headquartered or California-employing businesses must factor AB5 risk into PEO and contractor strategies; PEO-administered HR support is one mitigation channel.
Related terms
- Independent Contractor ClassificationThe legal determination of whether a worker is an employee or an independent contractor, governed by varying federal and state tests.
- FLSA (Fair Labor Standards Act)Federal law establishing minimum wage, overtime pay, recordkeeping, and youth-employment standards for private and public sector employment.
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