Independent Contractor Classification Checklist

INDEPENDENT CONTRACTOR CLASSIFICATION CHECKLIST

PURPOSE

This checklist assists employers in analyzing whether a worker should be classified as an independent contractor or an employee under the Fair Labor Standards Act (FLSA). This analysis is critical because employees are entitled to minimum wage, overtime, and other FLSA protections, while independent contractors are not.

IMPORTANT NOTICE: As of May 1, 2025, the DOL announced it will no longer enforce the 2024 Independent Contractor Rule. The DOL now applies the framework in Fact Sheet #13 (originally from 2008). However, the 2024 Rule remains on the books and may be applied by private litigants. This checklist addresses both frameworks for comprehensive analysis.

SECTION 1: GENERAL INFORMATION

Employer Information

Company Name: [________________________________]

EIN: [____]-[____]

Industry: [________________________________]

Address: [________________________________]

Worker Information

Worker Name: [________________________________]

Business Name (if applicable): [________________________________]

Service Provided: [________________________________]

Start Date of Engagement: [__/__/____]

End Date (if applicable): [__/__/____]

Analysis Information

Date of Analysis: [__/__/____]

Prepared By: [________________________________]

Title: [________________________________]

SECTION 2: OVERVIEW OF CLASSIFICATION TESTS

The Economic Reality Test

Under the FLSA, the determination of whether a worker is an employee or independent contractor is based on the "economic reality" of the relationship. The central question is:

Is the worker economically dependent on the employer for work (employee) OR is the worker in business for themselves (independent contractor)?

No single factor is determinative. The totality of the circumstances must be considered.

SECTION 3: DOL 2024 RULE - SIX-FACTOR ANALYSIS

Note: While the DOL is not currently enforcing this rule, courts and private litigants may still apply it.

Factor 1: Opportunity for Profit or Loss Depending on Managerial Skill

Key Question: Does the worker have the opportunity to earn profits or suffer losses based on their own managerial skill and initiative?

Considerations:

☐ Worker can negotiate pay
☐ Worker accepts or declines jobs
☐ Worker chooses the order or time to complete work
☐ Worker engages in marketing or advertising
☐ Worker decides whether to hire helpers or assistants
☐ Worker decides whether to purchase materials or equipment
☐ Worker can affect earnings through initiative, judgment, or foresight

Worker's Actual Circumstances:

☐ Worker determines own prices/rates
☐ Worker can work for multiple clients simultaneously
☐ Worker decides when/whether to take on additional work
☐ Worker has discretion to reduce costs or increase productivity
☐ Worker can realize profits through efficient management
☐ Worker risks financial loss if job takes longer than anticipated

Analysis:

[________________________________]

Factor 1 Conclusion:

☐ Weighs toward EMPLOYEE (limited profit/loss opportunity)
☐ Weighs toward INDEPENDENT CONTRACTOR (meaningful profit/loss opportunity)
☐ Neutral

Factor 2: Investments by the Worker and the Potential Employer

Key Question: What is the nature and extent of any investments made by the worker compared to the employer?

Note: Do not compare on a dollar-for-dollar basis. Examine whether the worker makes similar types of investments that suggest independent operation.

Worker's Investments:

☐ Tools and equipment
☐ Vehicles
☐ Materials and supplies
☐ Workers/helpers hired and paid by worker
☐ Workspace/office space
☐ Insurance
☐ Licensing/certifications
☐ Marketing/advertising
☐ Training
☐ Other: [________________________________]

Description of Worker's Investments:

[________________________________]

Approximate Value of Worker's Investments: $[________________________________]

Employer's Investments for This Work:

[________________________________]

Analysis:

[________________________________]

Factor 2 Conclusion:

☐ Weighs toward EMPLOYEE (minimal independent investment)
☐ Weighs toward INDEPENDENT CONTRACTOR (capital/entrepreneurial investment)
☐ Neutral

Factor 3: Degree of Permanence of the Work Relationship

Key Question: How permanent or indefinite is the work relationship?

Considerations:

Duration:

☐ Open-ended/indefinite engagement
☐ Fixed term/project-based engagement
☐ Seasonal/sporadic engagement
☐ Single project only

Actual Duration of Relationship: [________________________________]

Exclusivity:

☐ Worker works exclusively or primarily for this employer
☐ Worker works for multiple clients/companies
☐ Worker is free to work for competitors

Pattern of Work:

☐ Continuous/full-time work
☐ Regular part-time work
☐ Intermittent/as-needed work
☐ Project-based work

Analysis:

[________________________________]

Factor 3 Conclusion:

☐ Weighs toward EMPLOYEE (indefinite/exclusive relationship)
☐ Weighs toward INDEPENDENT CONTRACTOR (definite/non-exclusive relationship)
☐ Neutral

Factor 4: Nature and Degree of Control

Key Question: What is the nature and degree of control exercised by the employer over the worker?

Scheduling Control:

☐ Employer sets work schedule
☐ Worker sets own hours
☐ Employer requires certain hours of availability
☐ Worker can work whenever they choose

Supervision of Work:

☐ Employer supervises how work is performed
☐ Worker has latitude in how to complete work
☐ Employer provides detailed instructions
☐ Worker uses own methods and judgment

Work Location:

☐ Employer requires work at specific location
☐ Worker chooses work location
☐ Nature of work requires specific location (not employer's choice)

Economic Control:

☐ Employer sets pay rate
☐ Worker negotiates rates
☐ Employer controls pricing to third parties
☐ Worker can determine prices charged

Other Control Indicators:

☐ Employer provides training
☐ Employer requires specific tools/software
☐ Employer restricts worker from serving others
☐ Employer requires compliance with specific procedures
☐ Employer evaluates performance beyond job completion
☐ Worker can hire substitutes/helpers without employer approval

Analysis:

[________________________________]

Factor 4 Conclusion:

☐ Weighs toward EMPLOYEE (significant employer control)
☐ Weighs toward INDEPENDENT CONTRACTOR (worker controls manner/means)
☐ Neutral

Factor 5: Extent to Which the Work Performed Is an Integral Part of the Employer's Business

Key Question: Is the function performed by the worker an integral part of the employer's business?

Employer's Core Business Activities:

[________________________________]

Worker's Function:

[________________________________]

Relationship to Core Business:

☐ Work is critical/central to employer's business
☐ Work is necessary but peripheral to employer's business
☐ Work could easily be outsourced to any provider
☐ Work is one-time or specialized need

Integration Analysis:

☐ Worker's services are regularly/continuously required
☐ Worker performs same work as employer's employees
☐ Work is performed at employer's premises
☐ Work is marketed as part of employer's services
☐ Employer's business depends on this type of work

Analysis:

[________________________________]

Factor 5 Conclusion:

☐ Weighs toward EMPLOYEE (integral to employer's business)
☐ Weighs toward INDEPENDENT CONTRACTOR (not integral to business)
☐ Neutral

Factor 6: Skill and Initiative

Key Question: Does the worker use specialized skills, and do those skills contribute to business-like initiative?

Worker's Skills:

☐ Specialized training required
☐ Technical expertise
☐ Professional license/certification
☐ Unique abilities or talents
☐ General skills widely available

Describe Worker's Specialized Skills:

[________________________________]

Use of Skills:

☐ Worker brings specialized skills to a task
☐ Worker uses skills in connection with business-like initiative
☐ Specialized skills were developed through employer training
☐ Skills are used exclusively for this employer

Business Initiative Indicators:

☐ Worker markets services independently
☐ Worker maintains a distinct business identity
☐ Worker has business cards/website
☐ Worker serves multiple clients
☐ Worker has business licenses/permits
☐ Worker assumes risk for business decisions

Analysis:

[________________________________]

Factor 6 Conclusion:

☐ Weighs toward EMPLOYEE (skills without business initiative)
☐ Weighs toward INDEPENDENT CONTRACTOR (skills with business initiative)
☐ Neutral

SECTION 4: DOL FACT SHEET #13 FRAMEWORK

Note: This is the framework currently being applied by DOL enforcement.

Traditional Economic Reality Factors

SECTION 5: IRS COMMON LAW TEST (For Reference)

Note: The IRS uses a different test than the DOL. Employers should consider both for comprehensive compliance.

Behavioral Control

☐ Employer provides instructions about when, where, how to work
☐ Employer provides training
☐ Employer evaluates work performed (not just results)

Assessment: ☐ Employee ☐ Independent Contractor

Financial Control

☐ Worker has significant unreimbursed expenses
☐ Worker has investment in facilities
☐ Worker makes services available to general public
☐ Worker is paid by the job (not hourly/salary)
☐ Worker has opportunity for profit/loss

Assessment: ☐ Employee ☐ Independent Contractor

Type of Relationship

☐ Written contract describes relationship
☐ Benefits provided (insurance, pension, vacation)
☐ Permanency of relationship
☐ Services provided are key activity of business

Assessment: ☐ Employee ☐ Independent Contractor

SECTION 6: STATE LAW CONSIDERATIONS

State(s) Where Work is Performed: [________________________________]

California AB5 / ABC Test

☐ (A) Worker is free from control and direction in performing work
☐ (B) Worker performs work outside usual course of hiring entity's business
☐ (C) Worker is customarily engaged in independently established trade/occupation

ABC Test Conclusion: ☐ Employee ☐ Independent Contractor

Other State Tests

State: [________________________________]

Test Applied: [________________________________]

Conclusion: ☐ Employee ☐ Independent Contractor

SECTION 7: CONTRACTUAL AND BUSINESS INDICATORS

Written Agreement

☐ Written independent contractor agreement exists
☐ Agreement specifies worker is independent contractor
☐ Agreement describes scope of services
☐ Agreement provides for payment terms
☐ Worker submitted invoice for services

Note: A written agreement alone does not determine status. Economic reality controls.

Business Indicators (Worker)

☐ Worker has registered business entity (LLC, Corp, etc.)
☐ Worker has business license
☐ Worker has own liability insurance
☐ Worker has own workers' compensation insurance
☐ Worker has EIN
☐ Worker files Schedule C
☐ Worker has multiple clients
☐ Worker advertises services to public
☐ Worker has own business location
☐ Worker can delegate work to others

Tax Treatment

☐ Employer issues Form 1099-NEC
☐ Employer issues Form W-2
☐ No withholding for taxes
☐ Taxes withheld from payments

SECTION 8: RISK ASSESSMENT

Red Flags for Misclassification

☐ Worker performs same duties as employees
☐ Worker works exclusively for employer
☐ Worker works full-time or set schedule
☐ Employer provides all tools and equipment
☐ Worker has been an employee in past
☐ Worker was converted from employee to IC
☐ Worker cannot work for competitors
☐ Long-term, indefinite relationship
☐ Worker is integral to daily operations
☐ No written independent contractor agreement
☐ Payment is similar to employees (hourly, biweekly)

Number of Red Flags Present: [____]

Risk Level Assessment

☐ LOW RISK - Clear independent contractor characteristics; few/no red flags
☐ MODERATE RISK - Mixed indicators; some red flags present
☐ HIGH RISK - Multiple red flags; strong employee indicators

SECTION 9: OVERALL CLASSIFICATION DETERMINATION

Summary of Factor Analysis

Totality of Circumstances Analysis

[________________________________]

Final Classification Determination

☐ EMPLOYEE - Worker should be classified as an employee for FLSA purposes

☐ INDEPENDENT CONTRACTOR - Worker may be classified as independent contractor for FLSA purposes

☐ UNCERTAIN - Further analysis or legal consultation recommended

Rationale for Determination

[________________________________]

SECTION 10: RECOMMENDATIONS AND ACTION ITEMS

☐ Maintain current classification
☐ Reclassify worker as employee
☐ Restructure relationship to support IC classification
☐ Obtain legal opinion
☐ Implement written IC agreement
☐ Review similar workers for consistency
☐ Consider voluntary reclassification program
☐ Other: [________________________________]

SECTION 11: APPROVAL AND DOCUMENTATION

Prepared By

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

Signature: _______________________________________

Reviewed By

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

Signature: _______________________________________

Legal Review

Attorney Name: [________________________________]

Date: [__/__/____]

Signature: _______________________________________

SECTION 12: SUPPORTING DOCUMENTATION

☐ Independent contractor agreement
☐ Scope of work/statement of work
☐ Invoices from worker
☐ 1099-NEC forms issued
☐ Worker's business documentation (license, insurance, EIN)
☐ Evidence of other clients
☐ Marketing materials
☐ Prior analysis/opinions
☐ Other: [________________________________]

SOURCES AND REFERENCES

• DOL Fact Sheet #13 - Employment Relationship Under the FLSA
• 29 CFR Part 795 - Employee or Independent Contractor Classification
• DOL 2024 Independent Contractor Final Rule
• DOL Field Assistance Bulletin 2025-1

This checklist is provided for informational purposes only. Worker classification is a fact-specific inquiry that should be made with the assistance of qualified legal counsel.