California court applies Borello factors to classify workers as ‘employees,’ denies refund of employment taxes
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Wednesday, April 21, 2021

California court applies Borello factors to classify workers as ‘employees,’ denies refund of employment taxes

By Payroll and Entitlements Editorial Staff

Project specialists hired by the employer between January 1, 2011, and December 31, 2013 (the audit years) were classified as employees or independent contractors. The first-impression legal issue is whether in making that determination, the court should apply (1) the ABC test, later codified in the Labor Code or (2) the Borello factors, later codified in the regulations. The lower court determined the most significant factor was that the project specialists were “active instruments” of the enterprise and provided an indispensable service to the company. It thus determined that the Department properly characterized them as employees for purposes of work they performed during the audit years. Because the lower court’s findings under that standard were supported by substantial evidence and its qualitative weighing of the Borello factors was an appropriate exercise of the court’s discretion, the appeals court affirmed the decision denying a refund of additional assessed unemployment taxes (Vendor Surveillance Corp. v. Dir., Cal. Ct. of App., Fourth District, Division One. No. D076079, March 18, 2021).

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