The ABC test is a stricter classification test than the IRS common-law test. Under ABC, a worker is presumed to be an employee UNLESS the business can prove all three prongs:
- A — Worker is free from the company's control and direction in performing the work.
- B — Work performed is outside the usual course of the company's business.
- C — Worker is customarily engaged in an independently established trade, occupation, or business.
The B prong is the most restrictive. If you're driving riders for a rideshare company and rideshare is the company's main business, you may fail the B prong — and therefore must be classified as an employee. This was the legal logic behind California's 2019 AB-5, which threatened the gig economy until Proposition 22 (2020) created a specific carve-out for app-based drivers.
States using some form of the ABC test (as of 2026):
- California (most contexts; Prop 22 carve-out for app-based drivers)
- Massachusetts
- New Jersey
- Vermont
- ~20 others for unemployment insurance determinations only
Federal law (FLSA) does NOT use the ABC test. The Department of Labor uses the "economic reality" test (a multi-factor totality assessment). State and federal classification can therefore diverge: you might be an employee under state law but a contractor under federal law, or vice versa.