December 20, 2023

Employee or Contractor? Worker Classification Tests By State

The Wrapbook Team
Free ebook
Download Now
Free Template
Download Now

According to the Economic Policy Institute, an estimated 10-15% of employers misclassify at least one worker as an independent contractor. Whether intentional or not, misclassification is a crime that can result in serious financial penalties and, in some cases, jail time.

Enter: worker classification tests. Implemented by each state, worker classification tests define whether or not your worker is an independent contractor using simple criteria.

In this post, we cover the two major tests used in the United States, along with a list of which state they’re used in.

How are contractors and employees paid?

To determine your worker’s classification, you’ll need to vet the job according to your state’s labor law test.

Once you’ve determined your worker’s status, you’ll have to pay each worker very differently.

Generally, employees have greater labor protections according to the law. Employees are entitled to benefits such as:

  • Unemployment
  • Worker’s compensation
  • Overtime
  • Sick pay
  • Breaks
  • Payroll tax
  • Social security contributions
  • Medicare

Independent contractors, on the other hand, are handed a lump sum for their work, which they report on a 1099. They are not given any benefits, and their employer doesn’t pay any part of their taxes as part of their payroll.

Common Law Test

One test some states use to determine worker status is the Common Law Test.

Employee vs Contractor Classification - Wrapbook

Used by the IRS, New York, the District of Columbia, and 17 other states, the Common Law Test determines worker status by examining behavioral control, financial control, and relationship of the parties for each job.

If an employer wields any of these controls over the worker, then said worker is an employee.

1. Behavioral control

Behavioral control exists when an employer directs and/or controls how his or her workers perform the tasks they’ve been hired to do.

Common examples of behavioral control can include where the work is done, when the work is done, and how the work is done, especially when it comes to a code of conduct.

Even when the employer doesn’t set parameters, behavioral control can still exist. Additionally, just because a worker is highly competent and does not require much supervision or training doesn’t affect the employer’s rights of control.

2. Financial control

Financial control exists if ‌employers have a right to control their workers’ finances.

Do you reimburse your worker’s expenses? Do you provide your worker with facilities or equipment? Can your employee experience both profit and loss? The extent of these factors can determine financial control.

Financial control is also determined by if your worker is providing the same services on the open market. In other words, is your employee performing the same functions for multiple clients at once?

3. Relationship of the parties

Relationship of the parties examines how the worker and employer operate. If your relationship sounds like it's an employee-employer relationship, then your worker is probably an employee.

But how do you prove that? Several ways.

  • Written contracts or statements of work describing the intended relationship.
  • Whether the business provides benefits, such as sick pay, vacation, pension, equity, etc.
  • The terms of the employment, (i.e. how long is the contract for)?

A crucial determinant of party relationship is whether the worker’s business is out of the usual course of the employer’s business.

For example, a painter hired to paint a bank would likely be an independent contractor, as the function of a bank isn’t to paint. However, a painter working for a painting company could be an employee, since painting is a crucial part of a painting company.

Production Payroll

Pay your crew—better. Smart timecards, real-time hours-to-gross.

Learn More

The ABC Test

Like the Common Law Test, the ABC Test is yet another way states determine your worker’s status as either a contractor or employee.

Currently, the U.S. Department of Labor and 33 states use the ABC Test. Most recently, California changed from Common Law to this test.

The ABC test uses three factors that are in some ways similar to portions of Common Law.

  • Whether there is an Absence of control 
  • Whether the Business of the worker is unusual to and/or away from the hiring organization’s facilities 
  • Whether the worker is Customarily engaged as an independent contractor in this trade or occupation

The ABC test presumes a worker is an employee unless the facts and circumstances provide evidence of independent contractor status based on the criteria.

1. Absence of control

Absence of control exists if the worker is free from the direction or control of the hiring organization both by contract or agreement and in fact.

There are, however, minor exceptions. For example, the hiring organization may set some hours, because of access restrictions. Yet, it still may not direct the worker in how the work is to be performed.

2. Business of the worker

To be classified as an independent contractor, the worker must perform work that is “unusual” in regards to the employing organization’s business and/or off the hiring entity’s premises.

For example, an attorney working for a restaurant as outside counsel would be an independent contractor. The work is unusual compared to the restaurant’s regular business and performed off site at the attorney’s office.

Additionally, painters hired to paint the inside of a bank would still be independent contractors. Even though they are performing their work at the employer’s office, their work is still unusual compared to the bank’s trade.

3. Customarily engaged

Various professions and trades are customarily independent contractors available on a per-job basis. They have their own business identity and engage in business for profit on the open market.

The Department of Labor also looks at what they call “economic realities.” The more dependent the worker is on a particular employer for income, the more they lean towards employee status.

ABC Test vs. Common Law

By the way regulations are worded, it’s possible for a worker to be an independent contractor under Common Law and an employee under the ABC Test.

For example, an employee can be classified as an independent contractor by the IRS. However, when trying to get covered for unemployment, that same worker could be classified as an employee, because the state (who handles unemployment) uses the ABC Test.

Worker Classification Test By State

Currently, each state has its own adopted test it uses to determine worker status.

States like California along with the Department of Labor use the ABC Test to determine worker status, while Common Law is the method for both New York and the IRS.

State / Territory Worker Classification Test
Alabama Common Law
Alaska ABC Test
Arizona Common Law
Arkansas ABC Test
California ABC Test
Colorado A&C of ABC Test
Connecticut ABC Test
Delaware ABC Test
District of Columbia Common Law
Florida Common Law
Georgia ABC Test
Hawaii ABC Test
Idaho A&C of ABC Test
Illinois ABC Test
Indiana ABC Test
Iowa Common Law
Kansas ABC Test
Kentucky Common Law
Louisiana ABC Test
Maine ABC Test
Maryland ABC Test
Massachusetts ABC Test
Michigan Common Law
Minnesota Common Law
Mississippi Common Law
Missouri Common Law
Montana A&C of ABC Test
Nebraska ABC Test
Nevada ABC Test
New Hampshire ABC Test
New Jersey ABC Test
New Mexico ABC Test
New York Common Law
North Carolina Common Law
North Dakota Common Law
Ohio ABC Test
Oklahoma A&B or A&C of ABC Test
Oregon ABC Test
Pennsylvania A&C of ABC Test
Puerto Rico ABC Test
Rhode Island ABC Test
South Carolina Common Law
South Dakota Common Law
Tennessee ABC Test
Texas Common Law
Utah ABC Test
Vermont ABC Test
Virginia A&B or A&C of ABC Test
Washington ABC Test
West Virginia ABC Test
Wisconsin A&C of ABC Test
Wyoming A&C of ABC Test

Still, some other states have their own method of determining worker status. In our list of classification tests by state, you’ll notice that some states only abide by specific parts of the ABC test (marked A,B,C). It’s important to pay particular attention to these state regulations.

Wrapping up

Whether you end up using the ABC Test or the Common Law Test, knowing your workers’ correct classification is essential to running accurate payroll and shielding yourself from potential lawsuits.

Now that you’ve identified what your employees and contractors ARE, it’s time to pay them. Not sure how to do that? Our practical guide to running film payroll has you covered.

Get Started

Payroll and accounting, on demand. Book a demo to see Wrapbook in action.

Get Pricing
Last Updated 
December 20, 2023


At Wrapbook, we pride ourselves on providing outstanding free resources to producers and their crews, but this post is for informational purposes only as of the date above. The content on our website is not intended to provide and should not be relied on for legal, accounting, or tax advice.  You should consult with your own legal, accounting, or tax advisors to determine how this general information may apply to your specific circumstances.

About the author
The Wrapbook Team

The Wrapbook Team consists of individuals who are thrilled about building modern software tools for creators. We’re a team of compassionate and curious people dedicated to solving complex problems with sophisticated solutions. You can find us across the U.S. and Canada.

Stay In The Know

Sign up for the Wrapbook newsletter where we share industry news along with must-know guides for producers.