Publicly traded companies need to know whether a director qualifies as "independent" for a variety of reasons.  Item 407 of Regulation S-K, for example, requires issuers to identify each director that is independent.  In determining independence, issuers with securities listed on Nasdaq or the NYSE are required use the independence standards of those exchanges.  Both the Nasdaq and the NYSE rules provide that a director is not independent if he or she is or was in the last three years an employee of the issuer.  Nasdaq Rule 5605(a)(2)(A) & NYSE Rule 303A.02(b)(i).  

Last month, I wrote about California's new law, AB 5, which adopts the so-called A-B-C test for whether someone is an "employee" for purposes of California's Labor Code.  See Has California Made Directors Employees?  California, can't dictate, whether a director is an employee for purposes of the NYSE and Nasdaq rules, but the classification of a director as an employee under California's new A-B-C test does engender the question of the meaning of "employee" in these rules.