Borello V Dept Of Industrial RelationsEdit
Borello v. Dept. of Industrial Relations stands as a foundational California decision on how to determine whether a worker is an employee or an independent contractor under state wage orders and unemployment insurance rules. Decided by the California Supreme Court in the late 1980s, the case rejected a single mechanical test in favor of a flexible, multifactor approach. This approach asks judges and agencies to weigh the totality of the circumstances surrounding a work relationship, rather than applying a rigid checklist. The decision has shaped how businesses hire, how workers are protected, and how disputes over misclassification are resolved for decades.
In the Borello framework, a court looks to many factors to decide whether a worker is in business for themselves or is economically tethered to the hiring entity. While control by the hiring entity is a central consideration, the court emphasized that no one factor is determinative. Instead, it counseled courts to balance various elements such as the nature of the work, the worker’s independence, and the relationship’s duration. This creates a more “totality of circumstances” test that can adapt to diverse industries, from skilled trades to services that resemble project-based work. The practical effect is that the line between employee and independent contractor is drawn with nuance, not by a single litmus test.
Background
The case arose in a context where a business relied on workers who performed services for many clients and did not appear to be embedded in the hiring company’s core operations. The state agency overseeing wage orders and related labor provisions challenged this arrangement as employment in disguise. The Borello decision did not abolish the traditional control test, but it placed it within a broader set of criteria designed to reflect real-world working relationships. By doing so, California courts and agencies gained a more adaptable tool for assessing worker status in a dynamic economy.
The Borello factors and approach
- The extent to which the hirer controls the manner and means of the work.
- Whether the worker is engaged in a distinct trade or business.
- The kind of occupation and whether it is usually performed under supervision or by a specialized worker without supervision.
- The skill required for the work.
- The instrumentality and place of work, including who provides tools and equipment.
- The length of the relationship and the continuity of the services.
- The method of payment (hourly, by job, or by result) and whether the worker has an opportunity for profit or loss.
- Whether the work is part of the hirer’s regular business.
- The degree of the worker’s independence in performing the job.
- The other circumstances that indicate whether the worker is economically dependent on the hirer or is in business for themselves.
The court stressed that all factors are relevant, but no single factor is dispositive. In practice, this means courts and agencies examine why the worker appears integrated into the hiring entity’s operations, whether the worker can operate with a measure of autonomy, how predictable the relationship is, and how the parties themselves frame their arrangement. The Borello approach recognizes the real-world complexity of modern labor arrangements, including cases where specialized expertise is delivered on a project basis or where workers maintain substantial independence while collaborating with a company on a long-term basis. Borello v. Dept. of Industrial Relations California Supreme Court
The decision’s legal impact and interpretation
The Borello framework provided California with a flexible, business-centered lens for classifying workers. For many years, it served as the default standard in disputes over wage orders and unemployment insurance classifications, guiding decisions on whether workers should be treated as employees with the corresponding payroll taxes, benefits, and protections, or as independent contractors responsible for their own taxes and business risk. The approach has been praised by many business groups for tempering a rigid, one-size-fits-all rule and for reflecting that the modern economy often relies on contractors who perform services that are integral but not inseparable from the hiring entity’s operations. independent contractor misclassification
At the same time, the Borello standard left room for aggressive enforcement in cases where courts or agencies believed a worker’s relationship should be treated as employment for regulatory purposes. Critics argued that the lack of a bright-line rule could lead to uncertainty, costly litigation, and inconsistent outcomes across industries. Proponents of more worker protections argued that the flexible, multifactor approach could be used to obscure real employment relationships and deprive workers of benefits. The debate over where to draw the line between independent contracting and employment has continued in California and across the country, particularly as the so-called gig economy expanded and traditional employment models were challenged. gig economy employee misclassification
Controversies and later developments
A central controversy around Borello concerns predictability and consistency in applying the test. Supporters argue that the multifactor approach accommodates a wide range of legitimate business models and prevents automatic labeling of workers as employees simply because they perform tasks that resemble those traditionally done by employees. Critics contend that the lack of a clear, singular test can invite disputes, create litigation risk, and allow some firms to structure arrangements to minimize benefits and payroll costs. From this standpoint, the Borello approach is seen as a careful balance between flexibility for employers and protections for workers, but one that can tip toward regulation if courts interpret the factors in a manner that favors the hiring entity. employment misclassification California labor law
The Borello decision prefigured later developments in California labor regulation. In 2018, the California Supreme Court in Dynamex Operations Center v. Superior Court shifted the default framework for many worker classifications to the ABC test, a stricter standard that makes it harder for workers to be deemed independent contractors in typical wage-order contexts. The ABC test requires three conditions: the worker must be free from control or direction, perform work outside the hirer’s usual business, and be engaged in an independently established trade or business. This approach tightened the gate for contractor status in many industries. Dynamex Operations Center v. Superior Court ABC test
In response to these shifts, California enacted AB 5, which codified the ABC test for many purposes, aiming to reduce misclassification and preserve labor protections for a broader swath of workers. The measure sparked intense political and business pushback, especially from industries relying on flexible contractor arrangements. In 2020, Prop 22 modified the application of some of these rules for specific gig-economy platforms, illustrating how the Borello lineage continues to influence policy debates and practical choices about who should be treated as an employee versus an independent contractor. AB 5 (California) Prop 22 (California)
Despite these changes, Borello remains a foundational reference point in discussions of how California analyzes worker status. It anchors the idea that employment classification rests on a balanced, context-sensitive assessment rather than a single, blunt criterion. The case continues to influence how courts, agencies, and policymakers think about the economics of work, employer liability, and worker protections in a modern economy. California wage orders unemployment insurance