Called a contractor, treated like an employee: the misclassification trap
By Employment Law Firm Editorial
Being paid on a 1099 does not automatically make someone an independent contractor. Both the U.S. Department of Labor and most state agencies apply a multi-factor test that looks at economic reality, not the label on the paperwork.
The current federal rule (29 C.F.R. Part 795) weighs six factors: opportunity for profit or loss, investment by the worker, permanence of the relationship, degree of control, whether the work is integral to the employer's business, and skill and initiative.
California, Massachusetts, and New Jersey apply the stricter ABC test, which presumes employee status unless the employer can prove all three prongs — including that the worker performs services outside the employer's usual course of business.
Misclassified workers are often owed unpaid overtime, minimum wage differentials, denied meal and rest breaks, unreimbursed business expenses, and unpaid payroll taxes.