Usa ic compliance guide
Welcome to Our State-by-State Guide for Hiring Independent Contractors in the USA. This guide is your essential resource for understanding the specific regulations for engaging with freelancers, 1099 or W2 workers, in each state. Whether you've been hiring freelancers for years or are just starting out, our guide is easy to understand and use. It gives you the information you need to make smart choices and create good, legal working relationships with independent contractors. And as always, if you need any help, call us!
Discover the IRS's shift from the 20-Factor Test to the Three-Category System in TCWGlobal's guide. Understand the impact on businesses and workers, and explore how TCWGlobal's Employer of Record services ensure compliance and reduce risks. Gain expert insights on navigating employment classification complexities in today's legal landscape.
A “right to control test” is used by the state of Alabama to decide whether an individual qualifies as an independent contractor or an employee. The right-to-control test is a common law test with twenty basic separate factors. Each factor is designed to evaluate who controls the work being performed. Not all points are relevant for all types of businesses. Major areas of the test include where, when, and how the work is being performed, if the business provides training to the individual, whether the services being rendered are an integration to the business, and whether or not the individual works for more than one business. Whether the work will be performed on a regular or sporadic basis is also a key point. The test also evaluates whether the hours to be worked are mandated by the company or if the individual has the right to work any hours they want to finish the job in the manner that they want without following specific directions from the company or company employees on how to perform the task.
The way the individual is paid is also a central consideration. If expenses are covered, whether the potential independent contractor could contract the work out to another individual or if they have to personally complete the work, if the potential contractor can quit without any liability, and whether or not the business can terminate the contract without liability (employment arrangements can be terminated without liability but independent contractor contracts cannot). Finally, a factor applying to all businesses is whether the services are being performed by the individual are offered to other businesses or are only performed for this particular business on an ongoing basis.
To review the entire twenty points please see: labor.alabama.gov
The standard ABC test is used by the state of Alaska to decide if an individual is an independent contractor or an employee. TheABC test considers an individual an employee unless all three factors of the test are met, if they are, the individual can be considered an independent contractor. The three factors are 1) the individual is free from the control and direction of the business in connection with the performance of the work and in fact; 2) the individual performs work that is outside of the company’s usual course of business; and 3) the individual is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
For example, a construction company cannot hire a full-time builder and consider them to be an independent contractor unless the builder also works for other businesses, and the work the builder will be performing is outside of the control of the construction company, as well as outside of their usual scope of business. Further, the test dictates that potential independent contractors will be considered to be employees rather than independent contractors if the contractor is not normally engaged in the independent contracting business by way of having offered similar services to other businesses. Reference to the ABC test in Alaska under the law can be found within Alaska Statute 23.20.525(a)(8)(A-C).
More information can be found here: labor.alaska.gov
A ‘right to control test’ is used in Arizona to determine whether an individual is an employee or an independent contractor. The right-to-control test looks at whether the company retains supervisory control over the potential independent contractor, the processes, and procedures for the work that will be performed, and whether the relationship will be ongoing in the same manner under which it was reviewed. The work must be part of the normal work or trade that the company’s business is a part of, so, for example, a line operator performing work within a manufacturing company would not qualify as an independent contractor. If the potential independent contractor retains the right to decide how and when to perform the task, and the task is outside of the company’s usual course of business, then Arizona law may allow the individual’s status to be that of an independent contractor.
Arizona law considers the totality of circumstances of the work in question and various indications of control between the company and the individual, including the length of the project or time spent performing the services, payment method, which party is furnishing the equipment necessary to complete the work, whether the company is able to hire or fire the individual or whether there is a contract for services between the parties, which party is responsible for payment of worker’s compensation insurance, the amount of control over the direction of the work the company has, and whether the work falls into the company’s normal course of business. If the potential independent contractor is not subject to rules or control of the company except by way of meeting a certain result, they are considered an independent contractor.
Reference to the right to control test can be found within Arizona Statute 23-902.
Arkansas uses the IRS’ 20-factor test for determining Independent Contractor status under Arkansas Code 11-1-204. A few of the factors used to determine status under this test include the level of instruction to be provided by the company in the form of training or working with an experienced employee of the company; whether the services are integrated into the business operation of the company for which the service is being performed; whether the services are required to be performed personally, or if the potential independent contractor can utilize others to complete the work; whether a continuing relationship exists between the parties; and the amount of flexibility the potential independent contractor in determining the time during which they will be performing the work. Not all of the factors in the 20-factor test can necessarily be applied to each project or status determination.
In California, the AB 5 bill became effective on January 1, 2020, and addresses determining the nature of an employment relationship through the use of the ABC test. The law requires that the ABC test be used for all legal purposes, adding new sections to Section 2750.3 of the Labor Code. When applying the ABC test, the workers must be free from the direction and control of the employer or hiring entity, in relation to the way the work being contracted is performed, both technically and in fact. The test requires that the worker is performing work that is outside of the employer’s normal business to be considered an independent contractor and that the IC is normally engaged in the profession, occupation, or trade that the service they are supplying to the employer falls within.
AB5 included a narrow exception for Business to Business (B2B) relationships wherein a business service provider providing services to a contracting business is exempt from using the ABC test to determine the status and instead must utilize the factors outlined in the Borello test to determine whether the business service provider can be properly classified as an independent contractor. Under the Borello test multiple factors are considered, including the contracting businesses' control over the manner and means of accomplishing the desired result, whether the work to be performed is integral to the business of the contracting business, whether the business service provider has made investments in equipment, and has the opportunity for profit and loss as part of their operations, the method of payment whether by project, job or hours, and the length of time for which the services will be performed.
Additional information on this exemption can be found on our website, here: https://www.tcwglobal.com/blog/1099/ab5.
Get Up To Date on Independent Contractors: AB 2257 Law in California
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Under Colorado Law, an individual is presumed to be an employee unless and until it is shown that the individual is free from control and direction of the company in the performance of services, both under contract and in fact, and that the individual is customarily engaged in an independent trade, occupation, profession or business related to the work performed. This means that the worker will be presumed to be an employee until the company meets its burden to establish otherwise.
The two main concepts used in determining an individual’s status as either independent contractor or employee: 1) whether the individual is free from the direction and control of the business within the performance of the service in reality and technically, meaning they look at not just what is written in the contract, and whether the individual providing the service is in the ongoing business of providing similar services to other companies, or the service is offered on the open market for other businesses to avail of, whether any business has done so or not at the point the company contracts the worker for the provision of the service.
More information can be found here: cdle.colorado.gov
The ABC test is used in Connecticut, which gives rise to the assumption that an individual is an employee instead of an independent contractor unless all three prongs of the test are met. Thus, if the individual is not under the control or direction of the company, the services being provided are outside of the usual course of the company’s business, and the individual is customarily engaged in an independently established business of the same nature of the services being provided, then the individual can be properly classified as an independent contractor. Factors considered in making the determination include behavioral control, that is when and where the individual will perform the work, and whether the potential independent contractor can be seen to be engaged in that profession, trade, or career ongoing which is the same in nature as the service being given to the company. In determining whether the potential independent contractor meets part “C” of the ABC test, Connecticut courts have used the following factors: whether the individual has state licensure or specialized skills, the existence of a separate place of business, apart from that of the company, whether the individual has made any capital investments in their operations, and whether the performance of the services affects the goodwill of the individual rather than the company in addition to considerations regarding the establishment of an independent business or trade on the part of the potential independent contractor. In the state, the overriding law is the Connecticut General Statute 31-222(a)(1)(B)(ii).
More information can be found here: portal.ct.gov
The right of control test is used in Delaware to decide if an individual is an independent contractor or an employee. An independent contractor must be an individual who is free to complete the work at their own direction and without company control, and who is normally engaged in the same type of work being provided to the company in the open market for other businesses. On the open market element, the potential independent contractor must at least offer the same service to other businesses to avail of at the same time as the work being completed for the company in question, even if no other company has availed itself of the services. Finally, the work being performed by the potential independent contractor must be materially different from the work that the company’s business is normally engaged in.
If the work the potential independent contractor provides is in fact integral to the company’s business, and it would be difficult for the potential company to function without the work being performed by the potential independent contractor, then the potential independent contractor must be considered an employee. An example is a carpenter working for a construction company, which is integral to the process of the business of a construction company, regardless of the fact the work done by the carpenter is not on the company’s premises. Additionally, there must be an opportunity for profit and loss for the individual to be an independent contractor, tools used for the performance of the work are provided by the independent contractor and not the company, and the time span of the work involved and whether the company maintains control over when and how the work is performed are considered in making the determination as to classification.
The District of Columbia uses the common law “right to control” test, which is governed by statue D.C. Code51-101. The test considers selection and engagement of the individual hired, the payment of wages, thepower of the one who hires over the other whom they have hired, andwhether the service performed by theindividual to be hired is a part of the regular business of the one who hired. Generally, D.C.’s Department of Employment Services considers the right to supervise, method of payment and whether the individual providing the service is engaged in an independent trade, service or business when determining whether there has been proper classification between an independent contractor or an employee.
The right of control test is used in Florida for determining the employment status of an individual between employee and independent contractor. This includes the extent to which the employer controls the direction of the work, whether the individual is engaged in a different line of work than the company for which they will be performing the work, the skills required for the work, which party supplies the tools to complete the work, where the work is performed, and the length of time the individual is needed to perform the work or provide the services. For example, if the work being performed is ongoing without a set end date, it is more likely that the individual will be an employee, however, if the work being performed is more sporadic in nature, they are more likely to be considered an independent contractor.
More information can be found here: dms.myflorida.com
Georgia looks at the nature and scope of the individual’s work to determine whether they can be properly classified as an independent contractor. There are seven factors used in making this determination including the ability to perform the same or similar work for other companies, the freedom on the part of the potential independent contractor to accept or reject assignments of work without consequence, no minimum number of hours to be worked, or orders to be processed, and discretion to set their own schedule, limited oversight and instructions on the part of the company, no geographic restrictions as to where the work can be performed and no requirement to act in a specific manner related to the performance of services for wages.
Hawaii follows the ABC test, requiring each one of the following conditions to be met for an individual to be considered an independent contractor and not an employee. The individual must not be controlled or directed by the company, the service being provided must not be within the normal course of business of the company in question, the individual must be normally engaged in the business of offering the services to other businesses similar to the services or work they will be supplying to the company in question. If all points are met, then the individual can be considered an independent contractor.
Idaho uses the right-to-control test to decide if a person should be considered an employee or an independent contractor. The main points of the right-to-control test considered by Idaho are direct evidence of the right to control, the method of payment and whether it is on a periodic or regular basis, the party that provides the major equipment needed for the performance of the work, and whether there is a right to terminate the relationship without liability. All points in the right-to-control test do not have to be met in Idaho, as the totality of the circumstances are considered. The Idaho Supreme Court has recognized that when there is doubt as to whether the relationship is that of an independent contractor or an employee, the doubt is to be resolved in favor of finding the individual to be an employee.
More information can be found here: iic.idaho.gov
Illinois follows the stipulations provided under the Employment Classification Act 185/10(b)(2) (2008), which stipulates the use of the ABC test. As with the ABC test, an individual will be presumed to be an employee and not an independent contractor unless the work that they are performing is outside of the employer's normal course of business, and that the work itself is not being performed at the employer’s place of business, with certain exceptions. Included exceptions are for repair technicians, sole proprietors, real estate brokers being paid on a commission-only basis, and agricultural laborers. Additionally, the individual must be regularly engaged in an established trade, occupation, profession, or business.
More information can be found here: des.illinois.gov
Indiana follows the IRS 20-factor test to determine whether an individual is an independent contractor or employee. The predominant of the twenty factors the Indiana courts use to determine independent contractor status is the degree of control that the company has over the manner and means of the work being performed by the individual. Their focus is not necessarily on the amount of freedom the potential independent contractor will have in performing the work, but on whether the company has the legal right to control the details of how the services are performed.
In Iowa, the Employment Security Law covers the determination of employment status between employees and independent contractors. Iowa Administrative Code Section 871-23.19(96) contains the guidelines that must be considered when the determination is made. There are generally three factors used by the courts to determine appropriate status in Iowa 1) behavioral control including the location and timing of work being performed, 2) financial control such as whether a significant investment is made, and 3) relationship of the parties including whether there is a contract and whether the service provided is crucial to the employer. All information that provides evidence of the degree of control the company maintains over the project or service is to be considered in determining whether an individual is an employee or independent contractor.
Kansas utilizes a right-to-control test and considers whether the individual performing the work’s right to control the manner and means by which those services are performed to be the most important factor in determining employee vs. independent contractor status. Under Kansas regulations, an individual will be considered to be an employee and not an independent contractor if the company maintains a right to end the relationship at will and without cause, as this is considered strong evidence of the right to control. Written contracts between the parties are considered but are not controlled under Kansas regulations.
More information can be found here: dol.ks.gov
In Kentucky, there are thirteen factors that distinguish whether an individual is an employee or an independent contractor, these factors answer the question of control over the individual performing work. Some of the key factors are whether the company has control over the means and methods of the work, whether the individual holds any permits, licenses, or certificates, and the method of payment. The nature of the work that the independent contractor provides is also considered and must be materially different from the work that the company’s business normally provides and must not be an integral part of the regular business provided by the company.
More information can be found here: kewes.ky.gov
Louisiana law defines an independent contractor as a person who renders services that are not considered manual labor, for a set fee and in relation to a specific result, either in units or in whole, creates work under their own direction and not the direction of the company, “and not by the means by which such result is accomplished”. The distinction between an employee and an independent contractor is determined on a case by case basis, however, the law states that a person is an employee unless they are free from direction and control in performing their services and they perform work that is not part of the usual work done by the business that has hired them to provide the services, and you are customarily engaged in an independently established trade, occupation, profession or business.
Maine uses a 7-factor test to determine whether an individual is presumed to be an independent contractor or an employee. There are certain types of work that, when performed, are generally not considered the work of an employee, including agricultural laborers, services performed for a foreign government, or domestic servants that are providing services within a person’s home. Under the 7-factor test, the following factors are considered: whether the individual is free from the control and direction of the company and will continue to be free of said control, in relation to how the work is completed, whether the work being performed falls outside of the company’s normal course of business, and that the individual is customarily engaged in the role of an established independent contractor business, by way of having their own tools, and offering similar services to other businesses. Additional consideration is given to whether payment is made based on factors directly related to the work performed.
More information can be found here: maine.gov
Maryland follows the ABC test for the purpose of determining independent contractor status. Under the ABC test, the individual being considered an independent contractor must be free to complete the work or perform the services at their own direction and without the company’s overriding control, both technically and in fact. The individual being evaluated to determine their status as an independent contractor must normally be engaged in the trade or profession in which the services that they are competing for the company fall within. Finally, the work must be outside of the company’s normal course of business and performed somewhere other than the company’s business premises or where their employees regularly perform work, with some exceptions. Industry exceptions include service technicians providing services to employers, persons working in the agricultural industry, and domestic servants working within a person’s home. Unless one of the exceptions applies, all of the factors of the ABC test must be met for the person to be considered an independent contractor.
More information can be found here: dllr.state.md.us
Massachusetts uses the ABC test to determine independent contractor status. Where all three points cannot be met, the individual cannot be considered an independent contractor and must be considered an employee. The three points are: 1) the independent contractor is deciding the direction of the work and is free from the control of the company about how to complete the work; 2) the independent contractor must be normally engaged in providing similar services to the general public or to other businesses as the services that are being provided to the company in question; 3) the work being completed must not be integral to the company’s business.
Industry exceptions exist in Massachusetts, including domestic servants who work in private homes, agricultural laborers, and services that are being performed by people who are employed by their sons, daughters, or spouses. Other exceptions are masters of vessels or seamen on vessels that are engaged in interstate or foreign commerce, students who are participating in work experience that is linked to a school program, and salespeople who work with real estate brokers who are paid on a commission basis.
More information can be found here: mass.gov
Michigan utilizes the economic realities test to determine whether an individual is an independent contractor or an employee. Similar to the IRS 20-factor test, the considerations are weighed heavily on behavior control factors such as the instructions, training, and timing of the work being performed. Additionally, financial control factors such as how the individual will be paid, expenses, and whether equipment or materials are being provided will be considered. Finally, the relationship factors are considered including the ability to perform work for multiple parties at one time, making services available to the general public and the right to discharge or terminate the relationship are considered.
More information can be found here: michigan.gov
Minnesota relies on the degree of control and independence in the relationship to determine whether an individual is an independent contractor or an employee. They utilize the three broad categories of behavioral control, financial control, and the relationship of the parties to assist in this determination. Behavioral control includes whether the business has a right to control or direct the work being performed. Financial control includes whether the business has the right to direct the financial aspects of the relationship such as whether travel is reimbursed, whether the potential independent contractor has the potential for profit or loss, and whether an investment in the equipment needed to perform the work or services has been made by either party. The relationship of the parties looks at how the parties view the relationship, whether the services being provided are a key aspect of the regular business activities, whether there is a right to fire or otherwise terminate the individual, and whether benefits are or will be offered. All relevant factors should be weighed in determining an individual’s status as an independent contractor or employee. The right to control the manner and means of the worker’s performance is the key issue.
More information can be found here: revenue.state.mn.us
Mississippi relies on Mississippi Law 71-5-11(J)(14) to determine whether an individual is an employee or an independent contractor, which utilizes the common law test. Specifically, to determine that a person is an independent contractor in Mississippi the following must be considered: 1) the extent of control that the company exercises over the details of the work, 2) whether or not the potential independent contractor is providing a service that is not integral to the company’s business, 3) the level and type of skills which the potential independent contractor is required to use in the commission of the service, 4) whether the potential independent contractor is supplying their own equipment and tools, 5) the length of the working period the potential independent contractor needs to provide the service, 6) the way the individual is paid, with independent contractors being paid by the job and employees being paid by accruing time. Industry exemptions exist for people who work in a church, inmates of a custodial or penal institution, or agricultural laborers.
More information can be found here: mdes.ms.gov
Missouri Statute 288.034(5) determines the test for deciding the employment status of an individual between independent contractor and employee. The statute states that the right to control tests should be used but it should not be limited to whether or not the company retains a right to control the means and manner of how the results are accomplished by the individual or if it is solely the results of the project that are controlled. If solely the results are controlled, the individual can be classified as an
independent contractor. The basic IRS model 20-point test is also used in the determination of status in Missouri and is broken down into three main areas: financial control, the type of relationship between parties, and behavioral control.
More information can be found here: labor.mo.gov
Montana requires individuals seeking independent contractor status to hold a self-elected workers’ compensation insurance policy or obtain an Independent Contractor Exemption Certificate which was issued bythe Montana Department of Labor and Insurance. Additionally, the individual must be free from the control or direction of the company and engaged in their own independently established business, occupation, trade or profession.
More information can be found here: erd.dli.mt.gov
Nebraska courts have used a 10-factor test to decide if an individual is an employee or an independent contractor. This means to be considered an independent contractor the individual must be free to determine the direction of the job or way the service is provided and is only responsible for meeting a set end result, is engaged in a distinct occupation or business, and has the skill required for that occupation or business. The service to be provided by the potential independent contractor must be outside the company’s normal course of business, and the potential independent contractor must normally be engaged in the trade or profession to which the services they are providing to the company fall within. The potential independent contractor must also provide their own tools and equipment rather than the company. The length of time the work extends, the payment method, and the parties’ belief about their relationship are all additional factors considered under Nebraska law.
Nevada through a statute, has indicated that individuals who meet the following criteria are “conclusively presumed” to be independent contractors under NRS 608. The individual is not a foreign national legally present in the United States, they are required by contract with the company to hold any necessary state/local business license including any needed insurance or bonding and they meet 3 or more of the following: 1) they maintain control and discretion over how the work is performed; 2) they maintain control and discretion over the time the work is performed; 3) they are not required to work exclusively for the company, with limited exception; 4) they are free to hire others to assist with the work that will be performed for the company and 5) they make a substantial investment of capital in their business. Even if the individual is not conclusively presumed to be an independent contractor by satisfying three or more of the criteria, they are not automatically presumed to be an employee.
In New Hampshire, to qualify as an independent contractor, an individual must meet all 12 factors outlined in New Hampshire Statute 281-A:2 VI(b). The factors outlined in the law indicate that the company must be able to show that the independent contractor has been free from the company’s direction and control, and will continue to be free of same, in relation to how the work is completed. The service being performed must also fall outside of the company’s normal course of business, and the independent contractor must normally be engaged in the trade or profession offering similar services to those being undertaken by the company.
There are certain industry exceptions, including domestic servants who work within a person’s home, and workers in the agricultural industry.
More information can be found here: nh.gov
New Jersey uses the ABC test and its three main factors to determine the relationship between an individual and a company, and whether it is an employee or independent contractor, as regulated by New Jersey Statute 43:21-19(i)(6)(A-C). The individual must be performing the service without direction or control by the company as to the process involved to reach the end result, in order to receive independent contractor status. The service must fall outside of the company’s normal course of business, and the individual claiming independent contractor status must be seen to be providing similar professional services to the general public. The work involved must also be done outside of the company’s normal business premises unless the work is an ongoing service to the equipment or building that the company’s premises consists of.
There are certain industry exceptions including domestic servants working in a person’s home, and agricultural workers.
More information can be found here: nj.gov
New Mexico uses the ABC test, as regulated for under New Mexico Statute 51-1-42(F)(5) to determine whether an individual is appropriately classified as an independent contractor or an employee. The statute states that an independent contractor is one that a preponderance of evidence shows the individual has been and will continue to be free from taking direction or being under the control of the company in relation to how the job is performed. The service being provided must also fall outside of the company’s normal course of business and not be integral to it. Finally, the independent contractor status can only be used by individuals who can show they have been an independent contractor providing similar services to other businesses in the same or similar profession as that being provided to the company in question.
There are a few statutory industry exceptions to this rule, including agricultural workers, church workers, domestic servants within the home, and relatives employed by their spouse, son, or daughter.
Under New York Labor Law 511, the common law test is used to determine whether services rendered by an individual fall into an independent contractor classification. The test includes whether or not the individual is liable to take direction from the company or remains under the control of the company during the performance of the work being undertaken. The means of completing, and the equipment being used to complete the result must be provided by the individual, not the company, for the individual to be considered an independent contractor. These two factors are key considerations and as long as the independent contractor is free to complete the work where and how they want but only remain responsible for providing a completed end result, and the equipment needed to do the job is provided by the individual, then independent contractor status is allowed.
There are some industry exemptions, including some maritime-related work/dock work, agricultural labor, and domestic servants who work within a person’s home.
More information can be found here: dol.ny.gov
As of May 20, 2024, New York State’s “Freelance Isn’t Free” Act provides protections for individuals opting to do freelance, or independent contractor type, work by requiring a written contract that outlines essential information on the services to be provided. This requirement is for relationships where the fees provided for the services performed are $800 or more.
More information on this Act can be found here: governor.ny.gov and here: Understanding Freelance Isn't Free
North Carolina uses the right-to-control test to determine the proper classification between that of an independent contractor and an employee. An independent contractor must be engaged in an independent occupation or business other than that which the company’s business is in; they must retain independent use of their skills, training, or knowledge within the execution of the task. The work being undertaken must be at a specified price or lump sum payment and not be paid for through the accrual of time involved in completing the task. An independent contractor must not be liable to be terminated for using their own determined method of completing the work. An independent contractor must also be free to use assistants or subcontract the work to another. Finally, an independent contractor must be able to determine their own working schedule.
Industry exceptions exist which include agricultural laborers, church workers, family members working for one another, or domestic servants working within a person’s home.
More information can be found here: labor.nc.gov
North Dakota uses the common law test, which focuses primarily on the level of control a company will have over the individual performing work. There are twenty points to be considered under this test in the state, including the integration into the business, services being rendered, instructions and training, hiring, supervising and paying assistants, set working times, whether the work is full or part-time hours, if the work is done on the company premises, whether there are oral or written reports required ongoing during the working process by the potential independent contractor to the company, how payment is made either by the job or through the accrual of time needed to perform the work, the services being made available to the public by the potential independent contractor, the right to discharge, and the right to terminate. A set number of factors do not need to be met to achieve proper independent contractor classification, and each factor has a varying degree of importance in each determination, dependent upon the project and the factual content under which the services are performed. The North Dakota Department of Labor has the authority to verify the independent contractor status of any individual.
More information can be found here: nd.gov
Ohio uses the 20-factor common right to control test as regulated under Ohio Administrative Code 3358:5-11-04. The main consideration is that the individual has to be free from the control and direction of the company in the way that the service is accomplished and is only responsible for providing a set end result to be considered an independent contractor, both within the contract and as a fact. The relationship will be deemed to be between an employee and an employer unless the individual is free in fact to exercise their own direction to complete the task. As long as the work is outside the company’s normal course of business, paid for by job and not through the accrual of time, not integral to the company’s business, and within the control of the individual to determine who completes the task and how the task is completed, the individual can be considered an independent contractor.
There are general industry exceptions in line with other states’ views in Ohio, relating to agricultural workers, domestic servants working in a person’s home, and other sporadic work as defined under Ohio Rev. CodeAnn. 4141.01(3).
In Oklahoma, courts have determined that seven (7) factors are particularly important in determining appropriate classification. First, the degree of control exercised by the company over the work to be performed. Second, whether there is a continuing relationship between the parties. Third, whether the company has the right to discharge the individual at will. Whether the individual has the opportunity for profit and loss in the relationship is the fourth factor the courts have used to determine proper classification. The relationship the parties intend to create is also considered, as is which party has investments made in the facilities or equipment used to perform the work. Finally, whether the work to be performed is considered part of the company’s regular course of business will be considered. Additionally, the individual must also be able to show that they are normally engaged in the provision of independent contracting services on the open market in a career or profession that is similar to the services provided to the company in question.
Oregon uses a modified common law test to decide what classification is appropriate, either the employee or independent contractor, as outlined in the Oregon Revenue Statute
670.600. All individuals performing work are considered to be employees unless the courts and/or regulatory agencies are satisfied the individual meets the qualifications for independent contractor status. By Oregon statute, an independent contractor must be free from any control from the company and free to pursue their own direction in completing the service rendered to the company. The individual must also be customarily engaged in an independently established business, which can be done by either maintaining a business location that is separate from the company’s location or working within their own premises, such as working from their home.
To be properly classified as an independent contractor, one must bear the risk of losing from their business by way of entering fixed price contracts or being required to correct defective work, place a warranty over the services provided, or negotiate purchases liability insurance or indemnification agreements. They must also be providing services that are similar to at least one other company within a twelve-month period or be regularly advertising such services. To qualify as an independent contractor, one must also own their own equipment or make significant investments in the same. They must also have the authority to hire assistants or subcontract the work.
Exemptions include construction and landscaping contractors.
More information can be found here: oregon.gov
Pennsylvania uses a modified ABC test and considers an individual to be an employee unless proven otherwise. Independent contractors must these requirements points, as stipulated under PennsylvaniaAnnotated Statute 753(I). An independent contractor must be free from being under the direction or the control of the company for whom they are performing services in relation to how the services are performed, an independent contractor must be in the business of offering similar services in an independent contracting capacity to other companies as that which is being provided to the company in question, and the services are not part of a continuing relationship with the persons for whom the services are performed.
More information can be found here: uc.pa.gov
Rhode Island regulates the determination between employees and independent contractors under Rhode Island Revenue Statute 28-42-7. The applicable test in the state is the same 20-factor test utilized by the Internal Revenue Service in determining proper classification. In general, an individual would be properly classified as an independent contractor if they are engaged in an independent trade, business, or profession, offer services to the general public, and maintain control over the means and methods of the performance of their work.
More information can be found here: dlt.ri.gov
The courts in South Carolina do a case-specific analysis of several factors in order to determine the appropriate classification between an employee and an independent contractor. They have primarily relied on the right to control tests to make their determination. Thus, the right and authority of the company in their ability to control or direct the way in which the work is completed is the overriding determining factor, with independent contractors being free from any such control or direction. Factors used to determine the right to control include the method of payment, whether on a per-job basis or as an accrual of time, who furnishes the equipment used to complete and/or perform the work, and whether the company has the right to fire.
The South Carolina Employment Security Commission states that independent contractors must be allowed to do the job by their own determined methods without being subjected to any control by the company except to provide a finished work result.
South Dakota uses several elements to determine whether an individual is an independent contractor or an employee. The presumption is that the individual is an employee unless proven otherwise. One of the factors considered is whether the individual is free from any direction or control by the company in the
way the work is finished, both in fact and within the terms of the contract. To be properly classified, an independent contractor must also be normally engaged in an independently established business, profession, or trade. In order to demonstrate that the individual is engaged in a profession or trade that exists separately from the company for whom the work is being completed, it must be shown that the business of the individual will survive beyond the termination of the relationship between the individual and the company, “without hindrance from any other individual”. The independent contractor must also bear the risk of unemployment.
Tennessee will determine whether an individual is an independent contractor or employee by applying the IRS 20-factor test. This means that there are 20 factors that may or may not be relevant to determining the status of an independent contractor. All factors in the 20-factor test are not weighted equally and each analysis of the test will include a review of those factors that apply to the relationship. When there are factors that do not apply to a particular relationship, they are not considered in determining whether the relationship is that of an independent contractor or employee. Factors considered in the 20-factor test include whether the individual is required to follow the instructions of or receive training from the company, whether the services must be personally rendered by the individual or whether they are able to utilize others for assistance in completing the services, whether there is a continuing or short-term relationship between the parties, and whether the performance of the work will require the potential independent contractor to devote substantially full-time hours to complete the work or provide the services to the company.
More information can be found here: tn.gov
Texas utilizes the economic realty test for determining the appropriate classification of an individual performing work, which looks at the degree of control that is maintained by the employer. Degree of control includes being free to determine the manner in which the work is performed, whether there is payment of wages, whether necessary tools, supplies, or materials are provided to the individual, and whether the individual has the required skills to perform the work or provide the services. This is outlined in Section 401.012 of Texas’ Workers’ Compensation Act
More information can be found here: efte.twc.texas.gov
In Utah, the test used to determine whether an individual is appropriately classified as either an independent contractor or an employee is found in the Utah Employment Security Act, Section 35A-4-204(3). To be considered an independent contractor the person must be normally engaged in the trade or profession that they are offering to the company in question. An independent contractor must also be free from the requirement to follow the company's direction or control during the performance of the work. In determining the status, the way payment is made, who has or provides the equipment, where the work is being done, and whether it falls into the company’s normal course of business are also reviewed.
More information can be found here: jobs.utah.gov
Vermont uses the ABC test to determine if an individual can be considered an independent contractor, as indicated by the Vermont Department of Labor. All three components of the test must be met in order for one to be appropriately classified as an independent contractor. The services performed by an independent contractor must be free from any control and direction by the company in relation to how the work or services are completed, both in fact and within the contract. The service must fall outside of the company’s normal course of business and not be integral to the business of the company. The individual must also be offering services of a similar nature independently to other companies.
More information can be found here: labor.vermont.gov
The state of Virginia uses the full 20-point test as laid out by the Internal Revenue Service under 26 C.F.R 31.3306, as regulated in the state by Virginia Code Annotated 60.2-212(C). Virginia will generally consider an individual to be an independent contractor if they maintain control over the hours in which the work is performed, do not receive direction or training from the company, and are paid at the completion of the job rather than on an hourly, weekly, or monthly basis.
More information can be found here: vec.virginia.gov
Washington uses the ABC test to determine an individual’s classification as either an independent contractor or an employee. To be properly classified, an independent contractor must be able to show that they are free to direct and control the way in which the job is completed, both in reality and within the writing of the contract. The service being offered to a company must be outside of the company’s normal course of business, and not be integral to that business. The potential independent contractor must also be normally engaged in offering similar services to other companies in the same manner as it will be provided to the company.
Work will also be considered to be under independent contract and not by an employee of the company if the individual performing the work in question is responsible for filing expenses with the Internal Revenue Service for the type of business that they are providing to the company. The individual must either have an established Internal Revenue Service account or have made one within a reasonable period from the contract start date and is responsible for paying their own state taxes. The independent contractor must also be shown to have books or records reflecting income and expenses for the business that they are conducting or the services they are performing.
More information can be found here: esd.wa.gov
West Virginia uses a nine-factor test to determine proper classification between employee and independent contractor, as regulated under the West Virginia Employment Law Worker Classification Act. A potential independent contractor must be able to show that they have control over the amount of time spent providing services, where the services are performed, they are not performing the work exclusively for one party, can solicit other work, able to hire assistants to perform some or all of the work, are not required to perform additional work without modifying or replacing the contract, have not been re-classified by the IRS, has a license or other permission to utilize the other parties workspace if needed, and are responsible for maintaining and bearing all costs associated with performing the work or providing the services. If an individual satisfies at least three of the nine criteria and controls the means and manner of the work being performed, they may properly be classified as an independent contractor.
Wisconsin uses nine requirements to test whether an individual should be classified as an independent contractor or an employee. A potential independent contractor must maintain a separate business, obtain a FEIN or file self-employed tax returns, operate utilizing specific contracts that outline their control over their performance of the work or services provided, be responsible for the main expenses associated with performing the work, be responsible for satisfactorily completing the work, receive compensation on a per job or competitive bid basis, realize a profit or suffer a loss under the contract to perform work, have recurring business liabilities or obligations and the success of their business must depend on the relationship between their business receipts and expenditures.
More information can be found here: dwd.wisconsin.gov
Wyoming follows the ABC test to determine independent contractor status, as defined by Wyoming Statute Annotated 27-3-104(b). Specifically, a potential independent contractor must be able to show that they have been and will continue to be free from the control or direction of the company as to how the job is completed or services are performed, they must represent their services to the public as a self-employed individual or an independent contractor and are able to substitute other individuals for themselves in order to perform the work or provide the service.
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