How do agencies other than the IRS decide whether a worker is an employee or an independent contractor?
State workers’ compensation, unemployment compensation and tax agencies use various tests to determine worker status. Many use the common-law right of control test, but emphasize different factors than the IRS. Some use an economic reality test that focuses on whether a worker is economically dependent upon the hiring firm — this means that those who work for more than one firm at once are more likely to be classified as ICs.. Many state unemployment compensation agencies use a special statutory test, also called the ABC test. This test focuses on just a few factors: • whether the hiring firm controls the worker on the job • whether the worker is operating an independent business, and • where the work is performed — that is, whether the hiring firm or the workers gets to decide where the work gets done.
