California

Contractor Agreement Template for California

Generate an independent contractor agreement compliant with California AB 5 and the ABC test. California has the strictest worker classification rules in the US — ensure compliance to avoid costly misclassification penalties.

Create Contractor Agreement

AI-generated draft for review. Not legal advice. Starting at $29.

Legal Requirements in California

Must satisfy the ABC test under California AB 5 (Labor Code § 2775) for independent contractor status

Contractor must be (A) free from control, (B) performing work outside usual business, (C) have an independently established trade

Should address California Labor Code provisions on wage and hour protections

Must not include non-compete provisions (void under B&P Code § 16600)

Should address Proposition 22 exemptions for app-based transportation and delivery workers

Key Statutes & Regulations

California Labor Code § 2775 (AB 5 — ABC test)
Dynamex Operations West v. Superior Court (2018)
S.G. Borello & Sons v. Dept. of Industrial Relations (1989)
California Business & Professions Code § 16600

Common Pitfalls

•Failing to satisfy all three prongs of the ABC test — all three are required
•Hiring a contractor to perform your core business functions (violates Prong B)
•Not checking if the worker profession qualifies for an AB 5 exemption
•Including non-compete or exclusivity clauses that suggest employee status

Local Terminology

ABC Test: California three-prong test for independent contractor status under AB 5
Borello Test: Multi-factor test used for AB 5-exempt professions in California
AB 5: Assembly Bill 5 (2019) — California law codifying the ABC test for worker classification

How California Differs

California applies the strict ABC test (AB 5), making it much harder to classify workers as contractors

Prong B (outside usual course of business) is the most restrictive — the work must be outside your core business

Certain professions are exempt from AB 5 and use the more flexible Borello test instead

Misclassification penalties in California include $5,000-$25,000 per violation

Frequently Asked Questions

What is California ABC test?

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Under AB 5, a worker is an employee unless the hiring entity proves all three: (A) the worker is free from control and direction, (B) the worker performs work outside the usual course of the hiring entity business, and (C) the worker has an independently established trade or business. All three prongs must be satisfied.

What are the penalties for misclassification in California?

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California imposes penalties of $5,000 to $25,000 per violation for willful misclassification. Additional liability includes back wages, overtime, meal and rest break penalties, tax withholding, benefits, and potential class action exposure. The California Labor Commissioner actively investigates misclassification.

Are any professions exempt from AB 5?

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Yes. Certain licensed professionals are exempt from the ABC test and use the older Borello multi-factor test instead. Exemptions include licensed doctors, lawyers, architects, engineers, accountants, real estate agents, and certain creative professionals. Each exemption has specific requirements that must be met.

Can I hire a software developer as a contractor in California?

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It depends. Software developers are not automatically exempt from AB 5. You must satisfy the ABC test, including Prong B — the developer work must be outside your usual course of business. A software company hiring a developer for its core product likely fails Prong B. Consider whether a professional services exemption applies.