Bad advice, corrected · checked 19 October 2026
A 1099 doesn't make someone a contractor in California.
A 1099 is a tax form. Under Labor Code 2775, a worker you pay is an employee unless you can show all three parts of the ABC test.
The short version
A 1099 is a tax form. It doesn't decide anything. California's ABC test says a worker is an employee unless you prove all three parts.
A: you don't control the work. B: it's outside your usual business. C: they run their own independent business doing that work.
Some freelancers fit an exemption, like business-to-business. Willful misclassification can cost $5,000 to $15,000 per violation.
In numbers
| Part | What you must show |
|---|---|
| A | The person is free from your control and direction, under the contract and in fact |
| B | The work is outside the usual course of your business |
| C | The person is customarily engaged in an independent trade, occupation or business of the same kind |
Sources
Checked on 19 October 2026.
"a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied"
California Labor Code section 2775. Subdivision (b)(1). "a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation"
California Labor Code section 226.8. Subdivision (b), willful misclassification. "not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation"
California Labor Code section 226.8. Subdivision (c), a pattern or practice.
Labor Code 2776 sets out the business-to-business exemption: 12 criteria, all of which must be met. The penalties in 226.8 follow a final determination by the Labor and Workforce Development Agency or a court.
Watch
Psst posts every video on these channels.
Psst is made by Zain Ali, who co-founded Aiden Risk, a licensed insurance brokerage. This isn't insurance advice.