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What is the ABC test for classifying employees?

In Texas, misclassifying employees as independent contractors is a significant issue that can result in penalties for employers and lost benefits for workers. The ABC test is a tool used to determine whether a worker is an employee or an independent contractor. 

Although Texas does not strictly follow the ABC test in all employment scenarios, understanding it can help workers identify if they have been misclassified.

The ABC test explained

The ABC test has three prongs that must be met for a worker to be classified as an independent contractor:

  • A: Absence of Control
    The worker must be free from the employer’s control or direction in performing the work. This means that the employer cannot dictate how the work is done but only what is done.
  • B: Business of the Employer
    The worker’s services must be performed outside the usual course of the employer’s business. For instance, if a company that builds websites hires a graphic designer, the designer must be working independently from the company’s core business.
  • C: Customarily Engaged in an Independent Trade
    The worker must be customarily engaged in an independently established trade, occupation, or business. This means the individual has their own business or regularly provides the same services to others.

Implications of misclassification in Texas

Although Texas primarily uses the “economic realities” test, understanding the ABC test can still help workers. If misclassified, employees might lose out on benefits like overtime, health insurance, and worker’s compensation. Additionally, employers may face legal consequences for violating wage laws.

If you suspect you’ve been wrongly classified as an independent contractor, seek legal advice to protect your rights and recover any unpaid benefits.