Identifying the difference between an employee and an independent contractor is an important legal issue that impacts your church or ministry. In California, this can be done by applying the ABC test to the worker and ministry relationship. Misclassifying a worker can lead to serious legal and financial consequences, including fines, penalties, and back wages. In this article, we’ll walk you through applying the ABC test and common ministry scenarios to watch out for.
There are two main categories your ministry can use when hiring and classifying a worker:
Misclassifying your employees can create major complications for your ministry, including:
Misclassification of employees is one of the most important legal and financial risks faced by ministries who use independent contractors. Because of these complexities, your ministry may consider reaching out to a third party partner for help navigating this issue.
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.
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:
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.
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.
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.
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.
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.
Charlie Cutler is the President of ChurchWest Insurance Services, a California-based agency that specializes in providing insurance solutions to churches and related ministries. Charlie has been with ChurchWest for over 20 years and has extensive experience in the insurance industry, with a particular focus on the unique risks and challenges facing Christian organizations. Charlie is a sought-after speaker and has presented at numerous conferences and seminars on insurance and risk management topics.
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