Independent Contractor Classification Memo & Checklist

INDEPENDENT CONTRACTOR CLASSIFICATION MEMORANDUM & CHECKLIST

Cover Memorandum

To: [COMPANY EXECUTIVE / HR DIRECTOR]
From: [EMPLOYMENT COUNSEL / HR COMPLIANCE MANAGER]
Date: [DATE]
Re: Classification Analysis – [WORKER/COMPANY NAME]

1. Background

Provide a concise summary of the engagement, including services to be provided, expected duration, payment structure, and whether similar workers are engaged as employees. Attach the executed Independent Contractor Agreement and Statement(s) of Work.

2. Federal FLSA Economic-Reality Assessment

Complete the current six-factor analysis in 29 C.F.R. § 795.110. Assign a weight of Supports IC, Supports Employee, or Neutral, and explain how each fact bears on economic dependence.

Document how the factors interact. Under the current regulation, no factor or subset of factors is assigned predetermined weight, and additional facts may matter if they show whether the worker is in business for themself or economically dependent on the potential employer.

WHD enforcement overlay. Field Assistance Bulletin 2025-1 does not replace the regulation for private litigation. It directs WHD investigators, until further action, to use the July 2008 version of Fact Sheet 13 and Opinion Letter FLSA2019-6. For a potential WHD investigation, also analyze the separate seventh consideration in that guidance: the degree of independent business organization and operation. The Department's February 2026 proposal to replace Part 795 was still a proposed rule, not a final rule, when this template was verified.

3. Federal Employment-Tax Assessment

For federal employment taxes, use the common-law standard reflected in 26 U.S.C. § 3121(d)(2) and current IRS guidance. Review all evidence of control and independence in these three categories; there is no fixed number of factors that determines status.

If status remains uncertain, consider an IRS Form SS-8 request. A contract label or Form 1099 does not by itself establish independent-contractor status.

4. State Law Overlay Summary

5. Risk Conclusion

Provide a narrative conclusion summarizing overall classification risk and recommended safeguards (e.g., limited term, deliverables-based fees, multiple clients, optional conversion to employee).

6. Compliance Action Items

• Document evidence of any genuinely independent business operation, such as market-facing activity, insurance, facilities, investment, and other customers. No single document is a safe harbor.
• Periodically confirm whether the actual working relationship still matches the written analysis.
• Maintain copies of invoices, marketing materials, and proof of separate business entity.
• Schedule annual re-evaluation of classification.

Checklist: Independent Contractor Classification Controls

Engagement Planning

• ☐ Draft Statement of Work with deliverables, milestones, and acceptance criteria.
• ☐ Record whether the Contractor has a separate business entity, EIN, licenses, insurance, and public-facing business activity; treat these as evidence, not determinative facts.
• ☐ Verify required business licenses or professional credentials without assuming they establish independent-contractor status.
• ☐ Assess availability of alternative staffing models (temp agency, employment).

Contracting

• ☐ Execute an agreement that accurately describes deliverables, decision rights, payment, compliance obligations, and the parties' actual practices.
• ☐ Include warranties regarding independent business operations and tax obligations.
• ☐ Incorporate confidentiality, data security, and IP assignment provisions.
• ☐ Check state and industry-specific tests, exceptions, agreements, postings, and notices before engagement; for California, review §§ 2775-2787 rather than assuming the general ABC test always controls.

Operational Controls

• ☐ Provide onboarding that focuses on project expectations, not employment policies.
• ☐ Avoid setting work hours; focus on deliverables and deadlines.
• ☐ Permit Contractor to use own tools/equipment and work offsite when feasible.
• ☐ Ensure Contractor remains free to accept other engagements.

Payment & Recordkeeping

• ☐ Select a payment method consistent with the real relationship; invoices or milestone payments do not override contrary facts.
• ☐ Issue Form 1099-NEC when current federal law and IRS instructions require it; the form does not determine worker status.
• ☐ Track payments for state new-hire reporting requirements, if applicable.
• ☐ Retain certificates of insurance and business licenses.

Compliance Monitoring

• ☐ Conduct periodic audits verifying continued independence (multiple clients, business ads).
• ☐ Update agreement if engagement scope expands or extends beyond [MONTHS] months.
• ☐ Monitor state regulatory changes impacting classification.
• ☐ Maintain documentation for at least [YEARS] years following engagement.

Exit & Transition

• ☐ Document acceptance of final deliverables.
• ☐ Collect company property and terminate system access.
• ☐ Secure final invoice and release of claims if appropriate.
• ☐ Evaluate whether post-engagement non-solicitation or confidentiality obligations remain adequate.

Exhibits (Suggested)

• Exhibit A: Completed Statement of Work
• Exhibit B: Insurance Certificates and Business Licenses
• Exhibit C: State-Specific Disclosures and Notices
• Exhibit D: Annual Attestation of Independent Business Status

Sources and References

• eCFR — 29 C.F.R. § 795.110
• U.S. Department of Labor — Field Assistance Bulletin 2025-1
• Federal Register — 2026 proposed replacement of Part 795
• IRS — Independent contractor or employee
• California Legislature — Labor Code §§ 2775-2787
• New Jersey Department of Labor — ABC test
• Massachusetts Legislature — General Laws ch. 149, § 148B
• New York Department of Labor — Independent contractors