['Contingent Workforce']
['Independent Contractors']
09/07/2024
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Many organizations hire workers, such as independent contractors, who are not employees. Determining whether a worker is an employee or independent contractor, however, requires a look at the big picture, including applicable laws such as the federal Fair Labor Standards Act (FLSA).
If no state law exists, the federal FLSA will be the only law that applies. If a state law does exist, both the state law and the federal law can apply. Employers need to afford the provisions of each law with the greatest protections.
Employers must look at the totality of the circumstances using six factors, all are weighed equally, in deciding whether a worker is an employee or independent contractor:
- The nature and degree of control exercised by the employer over the worker;
- The worker's opportunity for profit or loss depending upon managerial skill;
- The worker's investment in equipment or material;
- The degree of skill the work entails and initiative of the worker;
- The degree of permanence of the work relationship; and
- The extent to which the work being performed is an integral part of the alleged employer's business.
NOTE: Many state laws regarding independent contractors reference the Internal Revenue Service (IRS) 20-factor test. The IRS has itself moved to a broader definition of independent contractor that looks at factors of behavioral control, financial control, and the relationship of the parties. However, since the 20-factor test is cited in some state laws, it may be a helpful reference: IRS Rev. Rul. 87-41 (1987-1 CB 296).
State workers’ compensation or unemployment laws can also have definitions related to employees and independent contractors. The content here focuses on general wage and hour law.
Federal citation(s)
- Part 795 — Employee or independent contractor classification under the Fair Labor Standards Act
Contingent workforce/Independent contractor
State
State defines independent contractor under wage and hour law
State regulatory citation
State-specific requirements
Arizona
Same as federal
ARS 23-216 - Independent contractors; applicabilityARS 23-362 - DefinitionsARS 23-1601 - Declaration of independent business status
C can declare independent business status. View state
Arkansas
Yes
Minimum Wage Act of the State of Arkansas (A.C.A. Title 11 Chapter 4) Empower Independent Contractors Act of 2019 (A.C.A. Title 11 Chapter 1, Subchapter 2 (2019))
Incorporates IRS definition. View state
New Hampshire
Yes
NH Statutes Ch. 279 – Minimum Wage LawNH Statutes §275:4 – Procuring Employment; Imposition of Conditions (Definitions)
Yes. View state
New Jersey
Yes
N.J.S.A. 34:11-56a et seq. – Wage and Hour Law N.J.A.C. 12:56-16.1 – Independent contractor status criteria N.J.S.A. 43:21-19(i)(6)(A-C)) – Unemployment Compensation Law
Yes. View state
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Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.