Tests
There are several different tests employed across the employment universe to determine proper classification of a worker. Regardless of which test is used, there is some commonality across the board. All of the tests are facts and circumstances tests that will look at the entire situation (and apply factors or elements) to ascertain the true nature of the relationship. If an employer sends 1099s instead of W-2s to a worker, that is not indicative of the true nature of the relationship. Likewise, if a worker signs a contract that states they are an independent contractor, the contract can only be one part of the evidence considered. Using an “industry standard” as an excuse for misclassification does not work either. Weighing factors or checking for elemental compliance is what you’ll see in the below tests.
Control Test
Originally, back in the 1800s, the test used was for agency liability purposes (respondeat superior) – the Control Test. The Control Test is used several federal statutes and their corresponding administrative agencies use the control test to determine a worker’s classification for reasons other than tort liability: Age Discrimination in Employment Act (ADEA), Americans with Disabilities Act (ADA), Employee Retirement Income Security Act (ERISA), Federal Unemployment Tax Act (FUTA), Federal Insurance Contributions Act (FICA), Internal Revenue Code (IRC), National Labor Relations Act (NLRA), Occupational Safety and Health Act (OSHA), Title VII of the Civil Rights Act of 1964, and the Worker Adjustment and Retraining Notification Act (WARN). Several state statutes and courts also use the control test in various ways. In fact, many courts use it as a default when the term “employee” is not statutorily defined.
The control test holds that a worker is an employee if the hiring entity “controlled or had the right to control the manner and means” of the worker’s work. In order to make this determination, the totality of the circumstances are viewed while weighing a lengthy list of factors that come from the Restatement (Second) of Agency:
- the skill required;
- the source of the instrumentalities and tools;
- the location of the work;
- the duration of the relationship between the parties;
- whether the employer has the right to assign additional projects to the worker;
- the extent of the worker’s discretion over when and how long to work;
- the method of payment;
- the worker’s role in hiring and paying assistants;
- whether the work is part of the regular business of the employer;
- whether the employer is in business;
- the provision of employee benefits; and
- the tax treatment of the worker.
The IRS uses a form of the Control Test and focuses on three categories of independence, behavioral, financial and the type of relationship.
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled