Worker Classification

Worker classification determines if a worker is an employee or independent contractor, affecting taxes, benefits, overtime, and protections. Misclassification leads to penalties, back taxes, and legal issues under federal and state laws.

Federal Standards

The Department of Labor uses a six-factor economic reality test for FLSA coverage, including control, profit opportunity, and work permanence. The IRS applies a three-category test—behavioral, financial, and relationship control—for tax purposes. These standards often differ, complicating compliance.

Employee vs. Contractor Rights

Employees get minimum wage, overtime, and unemployment benefits; contractors manage their own taxes and lack these protections. Further distinctions like exempt vs. non-exempt status affect overtime eligibility. Learn rights and responsibilities for each.

State Variations and Implications

Many states use the ABC test, presuming employee status unless proven otherwise. This impacts industries like platforms, as in Uber regulations. Liability rules, such as respondeat superior, depend on status. Contractors handle self-employment taxes and income reporting.

Modern Work Trends

Gig economy growth, including side hustles, heightens disputes amid union challenges.