A Guide to Independent Contractors

When California passed AB-5, it codified as law the 2018 Dynamex Supreme Court Decision. Under California law, worker classification is determined using the “ABC” test. To pass the ABC test, employers must demonstrate the following: 

A. Free of Control: Your worker must be free from your control and direction in connection with the performance of the work. You can not tell the worker when to show up, how to perform the work, how much you’ll pay, etc. 

B. Outside Usual Course of Business: The work that is being performed is is outside your usual course of business as a ministry. Hiring an electrician, assuming your ministry doesn’t provide electrical maintenance services, would be a good example of outside your usual course of business.

C. Established Business: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. This essentially means the worker should have their own business with their own business license and insurance. Essentially, the worker is in the business of performing the work and for more organizations than just yours.

Remember, if a worker fails to meet ANY of these factors, they are considered an employee under California Law.

Leslie DeMattia with ChurchHRNetwork recommends remembering this framework as “FOE”. For a deeper dive, check out our co-hosted webinar.

Common Ministry Scenarios

While the ABC test provides a clear framework for determining worker classification in California, it can be challenging for organizations, including churches and ministries, to accurately classify their workers. Here are some common scenarios where churches may misclassify workers as independent contractors instead of employees:

1. Pastors or ministers who are treated as independent contractors instead of employees. In many cases, these individuals may be considered employees because the church exercises control over their work, provides them with training, and sets their schedule.

2. Music directors or choir directors who are classified as independent contractors, but who are required to attend church services, rehearsals, and other events. These individuals may be considered employees because they are an integral part of the church’s operations and are subject to the church’s control.

3. Cleaning staff or maintenance workers who are hired as independent contractors, but who are required to work set hours and perform duties that are integral to the church’s operations. These individuals may be considered employees because they do not have an independent business and are subject to the church’s control.

4. Church event planners or coordinators who are hired as independent contractors, but who are required to follow specific guidelines and instructions provided by the church. These individuals may be considered employees because they are subject to the church’s control and do not have an independent business.

Conclusion

It’s crucial for your ministry understand employee classification so you can avoid legal and financial complications. Misclassifying workers can result in penalties, fines, and legal liabilities, such as worker’s compensation, wage and hour claims, and tax liabilities. For California ministries, mastering the ABC test is your first step to compliance and leading your ministry to financial and legal safety.