Are Your Workers Properly Classified? Understanding California’s Independent Contractor Rules

With the passage of AB 5 and the stricter “ABC Test” for determining employment status, California has fundamentally changed how employers can classify workers as independent contractors. This has major implications for the produce and food service industries—especially those relying on seasonal labor, consultants, or outsourced delivery staff.

Misclassifying a worker as an independent contractor when they legally qualify as an employee can lead to penalties, back pay, unpaid benefits, and even litigation. The California Labor Commissioner has increased audits and enforcement in recent months, making now the time to reassess your classifications.

Under the ABC Test, a worker is presumed to be an employee unless the employer can prove all three of the following:

• The worker is free from control and direction in the performance of the work;

• The work performed is outside the usual course of the hiring entity’s business;

• The worker is customarily engaged in an independently established trade or business.

Many food and produce businesses struggle with the second part of the test—especially if contractors are performing duties central to the business, such as food prep, delivery, or warehouse work. Even informal agreements or long-standing arrangements don’t override the law.

If you’ve relied on 1099 contractors in the past, it’s crucial to revisit those relationships now. An internal audit and legal review can help determine whether you need to convert some contractors to W-2 employees—and how to make the transition smoothly.

For more information on this topic or to learn how Produce Trust empowers companies working in the produce and food service industries, contact Richard Arias at: richard.arias@apdbla.com