Worker Classification: Employee Status Under the National Labor Relations Act, the Fair Labor Standards Act, and the ABC Test

April 20, 2021 R46765

Worker Classification: Employee Status
April 20, 2021
Under the National Labor Relations Act, the
Jon O. Shimabukuro
Fair Labor Standards Act, and the ABC Test
Legislative Attorney

The classification of workers as “employees” rather than independent contractors is critical for
purposes of most federal and state labor and employment laws. In general, the rights and

protections afforded by these laws are available only to employees and not to independent
contractors. Courts and administrative bodies have used various tests to make worker classification determinations in light of
the vague or circular definitions that have been adopted for the term “employee” in some labor and employment laws. This
report examines two such tests—the common law agency test and the economic reality test. The report also discusses the so-
called “ABC test,” which has been adopted in at least 20 states and the District of Columbia to determine employee status for
purposes of various state labor and employment laws. Legislation that would adopt the ABC test for purposes of one federal
labor and employment law—the National Labor Relations Act (NLRA)—was approved by the House of Representatives in
March 2021.
The common law agency test is currently used to determine employee status for purposes of the NLRA, which recognizes a
right to engage in collective bargaining for most private sector employees. Applying the test, courts and the National Labor
Relations Board (NLRB), the federal agency that enforces the NLRA, consider a variety of factors derived from the
Restatement (Second) of Agency to determine whether a worker is an employee or independent contractor. These factors
include the extent of control exercised by a hiring entity over the worker, whether the worker is engaged in a distinct
occupation or business, and the level of skill required by the worker to provide services. In 2019, the NLRB indicated that a
worker’s entrepreneurial opportunity for economic gain or loss would be a “prism” through which to examine the common
law factors.
The economic reality test is currently used to determine employee status for purposes of the Fair Labor Standards Act
(FLSA), the federal law that requires employers to pay a minimum wage and overtime compensation for hours worked in
excess of a 40-hour workweek. Federal appellate courts have generally identified six factors that should be considered to
determine whether a worker is an employee or independent contractor for purposes of the FLSA. These factors include the
nature and degree of control exercised by the hiring entity over the worker, and whether the worker invested in equipment or
materials to perform the work. Although courts have indicated that all of the factors should be considered, the U.S.
Department of Labor recently promulgated a rule that emphasized two factors—a worker’s entrepreneurial opportunity for
profit or loss and the hiring entity’s control over the worker—as more determinative of employee status.
Unlike the common law agency test and the economic reality test, the ABC test presumes that a worker is an employee. The
worker will be classified as an independent contractor only if the hiring entity can satisfy the test’s three elements: (a) the
individual is free from the entity’s control or direction in performing his work, both under a contract for the performance of
such work and in fact; (b) the work performed by the individual is outside the usual course of the entity’s business; and (c)
the individual is customarily engaged in an independently established trade, occupation, or business of the same nature as the
work performed for the entity. While the reasons for adopting the ABC test may vary, at least some states have expressly
described an interest in preventing employers from misclassifying their workers to avoid labor and employment law
obligations.
Congressional Research Service

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

he classification of workers as “employees” rather than independent contractors is critical
for purposes of most federal and state labor and employment laws. In general, the rights
T and protections afforded by these laws are available only to employees and not to
independent contractors, defined as individuals who are retained to complete a specific project,
but are “free to do the assigned work and to choose the method for accomplishing it.”1 The
misclassification of workers as independent contractors leads not only to the denial of
entitlements like overtime compensation, but also results in economic loss to the government.
The U.S. Department of Labor has observed: “Employee misclassification generates substantial
losses to the federal government and state governments in the form of lower tax revenues, as well
as to state unemployment insurance and workers’ compensation funds.”2
Because labor and employment laws often define who may be considered an “employee” in a
vague or circular fashion, courts and administrative bodies have adopted various tests for making
classification determinations.3 In general, these tests require consideration of various factors, such
as the control exercised by an alleged or putative employer over the worker, to determine whether
an individual is an employee or independent contractor. Notably, different laws may require the
use of different tests, with some tests possibly emphasizing certain factors over others.4
This report examines the tests used to determine employee status for purposes of two federal
labor and employment laws: the National Labor Relations Act (NLRA),5 which recognizes a right
to engage in collective bargaining for most private sector employees; and the Fair Labor
Standards Act (FLSA),6 which requires employers to pay a minimum wage and overtime
compensation for hours worked in excess of a 40-hour workweek. In addition to being two
discreet tests, both have recently been reconsidered by the federal agencies that enforce the
NLRA and FLSA.
The report also reviews the so-called “ABC test,” an alternative test that has been adopted by at
least 20 states and the District of Columbia to determine employee status for purposes of state
unemployment compensation programs and at least some state employment laws. Unlike the tests
used for the NLRA and FLSA, the ABC test presumes that a worker is an employee. The
individual will be classified as an independent contractor only if the hiring entity can satisfy the
test’s three elements.7 The test is deemed the “ABC test” because of this standard. Some have
argued that the ABC test should be used generally for employee status determinations because it
provides greater predictability for workers.8 Legislation that would adopt the ABC test to

1 Independent Contractor, Black’s L. Dictionary (11th ed. 2019).
2 U.S. Dep’t of Lab., Misclassification of Emps. as Indep. Contractors, https://www.dol.gov/agencies/whd/flsa/
misclassification (last visited Apr. 1, 2021).
3 See, e.g., 29 U.S.C. § 203(e)(1) (defining the term “employee” for purposes of the Fair Labor Standards Act to mean
“any individual employed by an employer”); 29 U.S.C. § 203(d) (defining the term “employer” for purposes of the Fair
Labor Standards Act to include “any person acting directly or indirectly in the interest of an employer in relation to an
employee . . .”).
4 See, e.g., discussion infra “SuperShuttle DFW” (describing emphasis on entrepreneurial opportunity when
determining employee status for purposes of the National Labor Relations Act).
5 29 U.S.C. §§ 151-169.
6 29 U.S.C. §§ 201-219.
7 See discussion infra “The ‘ABC Test’.”
8 See, e.g., Eric Marokovits, Easy as ABC: Why the ABC Test Should be Adopted as the Sole Test of Employee-
Independent Contractor Status, 2020 CARDOZO L. REV. DE NOVO 224, 248 (2020).
Congressional Research Service

1

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

determine employee status for purposes of the NLRA was recently approved by the U.S. House of
Representatives.9
National Labor Relations Act
The NLRA attempts to mitigate and eliminate labor-related obstructions to the free flow of
commerce by “encouraging the practice and procedure of collective bargaining[.]”10 Section 7 of
the NLRA states: “Employees shall have the right to self-organization, to form, join, or assist
labor organizations, to bargain collectively through representatives of their own choosing, and to
engage in other concerted activities for the purpose of collective bargaining or other mutual aid or
protection . . . .”11 The NLRA requires an employer to negotiate in good faith with a labor
organization that becomes the exclusive representative for a bargaining unit of employees.12
Independent contractors are specifically excluded from the NLRA’s definition for the term
“employee.”13 Thus, independent contractors do not enjoy the rights and protections afforded by
the law, and an employer is not required to negotiate with them over the terms and conditions of
their employment.
To determine whether a worker is an employee or independent contractor, the National Labor
Relations Board (NLRB or Board), the federal agency that administers the NLRA, applies a
common law agency test that examines various factors derived from the Restatement (Second) of
Agency.14 These factors include the extent of control a hiring entity exercises over the worker,
whether the worker is engaged in a distinct occupation or business, and the level of skill required
of the worker to provide services.15
In applying the common law agency test, the NLRB and courts have indicated that no one factor
is determinative, and that the relationship between a hiring entity and an individual should be

9 Protecting the Right to Organize Act of 2021, H.R. 842, 117th Cong. (2021).
10 See 29 U.S.C. § 151. See also Collective Bargaining, Black’s L. Dictionary (11th ed. 2019) (defining “collective
bargaining” to mean “[n]egotiations between an employer and the representatives of organized employees to determine
the conditions of employment, such as wages, hours, discipline, and fringe benefits.”).
11 29 U.S.C. § 157.
12 Id. § 158(d).
13 See id. § 152(3) (“The term ‘employee’ shall include any employee . . . but shall not include any individual employed
as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed
by his parent or spouse, or any individual having the status of an independent contractor . . .”).
14 See SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), slip op. at 1 (“To determine whether a worker is an
employee or an independent contractor, the Board applies the common-law agency test . . . The inquiry involves
application of the nonexhaustive common-law factors enumerated in the Restatement (Second) of Agency[.]”). The
Restatement of Agency is a treatise published by the American Law Institute that clarifies agency common law for
judges and lawyers.
15 Restatement (Second) of Agency, § 220(2) (Am. Law Inst. 1958) (“In determining whether one acting for another is
a servant or an independent contractor, the following matters of fact, among others, are considered: (a) the extent of
control which, by the agreement, the master may exercise over the details of the work; (b) whether or not the one
employed is engaged in a distinct occupation or business; (c) the kind of occupation, with reference to whether, in the
locality, the work is usually done under the direction of the employer or by a specialist without supervision; (d) the skill
required in the particular occupation; (e) whether the employer or the workman supplies the instrumentalities, tools,
and the place of work for the person doing the work; (f) the length of time for which the person is employed; (g) the
method of payment, whether by the time or by the job; (h) whether or not the work is part of the regular business of the
employer; (i) whether or not the parties believe they are creating the relation of master and servant; and (j) whether the
principal is or is not in the business.”).
Congressional Research Service

2

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

evaluated in its entirety.16 In NLRB v. United Insurance Company of America, a 1968 case
involving the employment classification of a group of insurance workers, the U.S. Supreme Court
observed:
[T]here is no shorthand formula or magic phrase that can be applied to find the answer, but
all of the incidents of the relationship must be assessed and weighed with no one factor
being decisive. What is important is that the total factual context is assessed in light of the
pertinent common-law agency principles.17
The party asserting an individual’s classification as an independent contractor has the burden of
establishing that worker status.18
Since Universal Insurance, the NLRB has, on occasion, revisited the use of the common law
agency test to determine employee status. For example, in FedEx Home Delivery, a 2014 case
involving the package delivery company’s drivers, the Board explained the significance of
considering a worker’s entrepreneurial opportunity for economic gain or loss when applying the
common law agency test.19 Although the Board had previously considered entrepreneurial
opportunity in the past,20 it sought in FedEx Home Delivery to “more clearly define the analytical
significance” of this factor.21 A majority of the Board maintained that no one factor is decisive,
that it would give weight to only actual and not theoretical entrepreneurial opportunity, and that
any constraints imposed by a company on an individual’s ability to pursue such an opportunity
would be considered.22 Notably, consistent with the Court’s decision in Universal Insurance, the
Board majority emphasized that entrepreneurial opportunity should be considered together with
the other common law factors.23 The majority noted that, along with evaluating the relevant
common law factors, it should also consider whether the evidence demonstrated “that the putative
independent contractor is, in fact, rendering services as part of an independent business.”24
Applying the common law agency test to the FedEx drivers, the Board majority concluded that
the workers satisfied most of the common law factors and should be considered employees and
not independent contractors.25 The majority found that FedEx exercised pervasive control over
the drivers’ day-to-day work, that the drivers performed duties that were a regular part of FedEx’s
business, and that no special skills were required for the drivers to perform their duties.26
Moreover, the majority maintained that the drivers had little entrepreneurial opportunity for gain
or loss for them to be considered independent contractors.27 For example, the majority considered

16 See, e.g., BKN, Inc., 333 NLRB 143, 144 (2001) (discussing the common law agency test factors and indicating that
“no single factor is controlling in making this determination.”).
17 NLRB v. United Ins. Co. of America, 390 U.S. 254, 258 (1968).
18 See BKN, Inc., 333 NLRB at 144; SuperShuttle DFW, 367 NLRB at 1.
19 FedEx Home Delivery, 361 NLRB 610 (2014).
20 In cases prior to FedEx Home Delivery, the National Labor Relations Board considered a worker’s entrepreneurial
opportunity for economic gain or loss as part of its application of the common law agency test, but emphasized that no
single factor was determinative. See, e.g., Dial-a-Mattress Operating Corp., 326 NLRB 884, 891 (1998) (finding
workers who provide customer delivery services to be independent contractors after evaluating the common law
factors, as well as their “significant entrepreneurial opportunity for gain or loss.”).
21 Id.
22 Id. at 619-21.
23 Id.
24 Id. at 619.
25 Id. at 627.
26 Id.
27 Id. at 624.
Congressional Research Service

3

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

the fact that the drivers’ arrangement with FedEx prevented them from working with other
employers and that the drivers’ work commitment to FedEx hindered their abilities to pursue
other commercial opportunities.28 The majority also noted the drivers’ inability to exercise control
over FedEx’s business strategy or change the prices charged to customers as evidence of the
drivers’ status as employees.29 Nevertheless, a dissenting Board member criticized the majority’s
evaluation of the drivers’ employee status, contending that the majority reduced entrepreneurial
opportunity for gain or loss to a “mere subfactor in their analysis.”30 The dissent identified the
drivers’ ability to sell their delivery routes, in particular, as evidence of actual entrepreneurial
opportunity, and maintained that the majority failed to consider “the full impact of what a sale
signifies in the context of the common-law test.”31
SuperShuttle DFW
In 2019, a new Board majority overruled FedEx Home Delivery, criticizing that decision for
minimizing consideration of entrepreneurial opportunity when determining employee status.32 In
SuperShuttle DFW, a case involving drivers who were contracted to provide services for the
shared-ride van company, the majority contended that, as the facts may warrant, entrepreneurial
opportunity is a “prism” through which the common law factors should be examined.33 The
majority indicated that employee status determinations should continue to require consideration
of the various common law factors, but emphasized that a worker would be deemed an
independent contractor when a qualitative evaluation of the factors demonstrate an opportunity
for economic gain or loss. According to the majority, entrepreneurial opportunity is a “principle
by which to evaluate the overall effect of the common-law factors on a putative contractor’s
independence to pursue economic gain.”34
The majority in SuperShuttle maintained that the 2014 standard in FedEx Home Delivery focused
too heavily on economic dependency and a company’s control over workers. The majority
observed that “[l]arge corporations such as FedEx or SuperShuttle will always be able to set
terms of engagement . . . but this fact does not necessarily make the owners of the contractor
business the corporation’s employees.”35 The majority thus determined that “where a qualitative
evaluation of common-law factors shows significant opportunity for economic gain . . . the Board
is likely to find an independent contractor.36
Applying this standard, the SuperShuttle majority concluded that the drivers were independent
contractors and not employees.37 Citing the drivers’ ability to work as much as they choose, their
discretion in choosing assignments, and their entitlement to the money earned from their chosen
assignments, the majority maintained that the drivers have a “significant opportunity for

28 Id.
29 Id.
30 Id. at 634.
31 Id. at 636.
32 SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019).
33 Id. at 9.
34 Id. at15.
35 Id. at 9.
36 Id. at 16.
37 Id. at 12.
Congressional Research Service

4

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

economic gain and significant risk of loss.”38 Moreover, the majority contended that these factors
were not outweighed by any countervailing factors that might support the conclusion that the
drivers were SuperShuttle employees.39
Criticizing the standard adopted by the majority in SuperShuttle, the dissent maintained that the
standard’s focus on entrepreneurial opportunity was inconsistent with how the common law
agency test was meant to be conducted.40 The dissent contended that by emphasizing
entrepreneurial opportunity, the new standard applied the kind of “shorthand formula” that was
criticized by the Court in United Insurance.41 Even when considering the drivers’ entrepreneurial
opportunity, the dissent argued that such opportunity was “minimal at best” as “it is SuperShuttle
that creates, controls, and constrains that ‘opportunity.’”42
The Board has continued to apply the SuperShuttle standard to make classification decisions.43 In
a 2019 advice memorandum involving the ride-share platform Uber,44 the Board considered the
proper classification for UberX45 and UberBLACK46 drivers by applying the common-law agency
test “as explicated in SuperShuttle.”47 While it acknowledged that several factors “point toward
employee status,” the Board contended that those factors were overwhelmed by the evidence
supporting independent contractor status.48 With regard to UberX drivers, in particular, the Board
observed:
Considering all the common-law factors through “the prism of entrepreneurial
opportunity” set forth in SuperShuttle, we conclude that UberX drivers were independent
contractors. Drivers’ virtually complete control of their cars, work schedules, and log-in
locations, together with their freedom to work for competitors of Uber, provided them with
significant entrepreneurial opportunity. On any given day, at any free moment, UberX
drivers could decide how best to serve their economic objectives: by fulfilling ride requests
through the App, working for a competing ride-share service, or pursuing a different
venture altogether.49
The Board further maintained that UberBLACK drivers worked in a manner similar to the UberX
drivers.50 Accordingly, they were also found to be independent contractors.51

38 Id.
39 Id.
40 Id. at 15.
41 Id. at 21.
42 Id. at 28.
43 See, e.g., Velox Express, Inc., 368 NLRB No. 61 (2019) (finding drivers for medical courier services company to be
employees for purposes of National Labor Relations Act).
44 Advice Memorandum from Jayme L. Sophir, Assoc. Gen. Couns., Div. of Advice, Nat’l Lab. Rel. Bd, to Jill
Coffman, Reg’l Dir., Region 20 (Uber Tech., Inc.) (Apr. 16, 2019), https://www.nlrb.gov/guidance/memos-
research/advice-memos.
45 Id. at 1 (describing UberX as a “general tier of service” that “involve[s] standard passenger cars of diverse makes and
economical fares.”).
46 Id. at 2 (describing UberBLACK as “involv[ing] higher-end black-colored vehicles and higher fares than UberX.”).
47 Id. at 3.
48 Id. at 13.
49 Id. at 14.
50 Id. at 14-15.
51 Id.
Congressional Research Service

5

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Fair Labor Standards Act
The FLSA requires an employer to pay an employee a minimum wage, as well as overtime
compensation at a rate of not less than one and one-half times an employee’s hourly rate for hours
worked in excess of a forty-hour workweek.52 Section 3(e)(1) of the FLSA defines the term
“employee” simply to mean “any individual employed by an employer.”53 Courts have construed
the term to exclude independent contractors.54
Whether an individual is an employee or independent contractor is often a threshold question that
must be answered to determine whether the FLSA’s requirements apply.55 In Rutherford Food
Corporation v. McComb, the U.S. Supreme Court observed that the existence of an employer-
employee relationship “does not depend on . . . isolated factors but rather upon the circumstances
of the whole activity.”56 In Rutherford Food, the Court concluded that a group of slaughterhouse
workers were employees of a meat packing company after considering a variety of factors,
including the use of the company’s premises and equipment to complete the relevant work.57
In subsequent decisions, the Court maintained that the economic reality of a working relationship
will determine whether an individual should be considered an employee or independent
contractor for FLSA purposes.58 Federal appellate courts have generally identified six factors as
particularly probative for evaluating the economic reality of such a relationship:
(1) The nature and degree of the alleged employer’s control as to the manner in which the
work is to be performed;
(2) The alleged employee’s opportunity for profit or loss depending upon his managerial
skill;
(3) The alleged employee’s investment in equipment or materials required for his task, or
his employment of workers;
(4) Whether the service rendered requires a special skill;
(5) The degree of permanency and duration of the working relationship;
(6) The extent to which the service rendered is an integral part of the alleged employer’s
business.59

52 29 U.S.C. §§ 201-219. The Fair Labor Standards Act also identifies exemptions from the minimum wage and
overtime requirements, and prescribes child labor standards.
53 29 U.S.C. § 203(e)(1). See also 29 U.S.C. § 203(g) (defining the term “employ” to mean “to suffer or permit to
work.”).
54 See, e.g., Karlson v. Action Process Serv. & Priv. Investigations, LLC, 860 F.3d 1089, 1092 (8th Cir. 2017) (“FLSA
wage and hour requirements do not apply to true independent contractors[.]”).
55 See, e.g., Sec’y of Lab. v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987), cert. denied, 488 U.S. 898 (1988) (determining
whether migrant workers are employees for purposes of the Fair Labor Standards Act or “independent contractors not
subject to the requirements of the Act.”).
56 Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947).
57 Id.
58 Tony & Susan Alamo Found. v. Sec’y of Lab., 471 U.S. 290, 301 (1985) (“The test of employment under the [Fair
Labor Standards] Act is one of ‘economic reality’ . . .”); Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33
(1961) (discussing economic reality rather than technical concepts as the “test of employment” under the Fair Labor
Standards Act).
59 See Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311-12 (11th Cir. 2013) (identifying the six factors that “guide
the ‘economic reality’ inquiry.”); McFeeley v. Jackson St. Ent., LLC, 825 F.3d 235, 241 (4th Cir. 2016) (“Application
Congressional Research Service

6

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Because the economic reality test is fact-specific, workers in similarly labeled positions have
sometimes been classified as “employees” covered by the FLSA, but in other instances, they have
been considered independent contractors.60 For example, janitors have been classified as
employees, as well as independent contractors, after applying the economic reality test. In Bulaj v.
Wilmette Real Estate & Management Company, a janitor who provided maintenance,
landscaping, and repair services for the defendant’s residential properties alleged violations of the
FLSA’s overtime provisions.61 The real estate management company argued that the janitor was
an independent contractor who was not subject to these provisions.
Applying the economic reality test, the federal district court in Bulaj contended that all six of the
relevant factors weighed in the janitor’s favor.62 For example, the court noted that the company
exercised control over the manner of the janitor’s work by instructing him to perform specific
duties, setting his work schedule, monitoring the quality of his work, and disciplining him when
his work did not meet expectations.63 The court also found that the janitor did not possess an
opportunity for additional profit or loss because his compensation consisted of a fixed salary and
a rent-free apartment at one of the properties.64
In contrast, the U.S. Court of Appeals for the Tenth Circuit concluded that another janitor was an
independent contractor and not an employee for purposes of the FLSA. Like the janitor in Bulaj,
the janitor in Barlow v. C.R. England argued that the defendant, a trucking company that operated
a maintenance yard, violated the FLSA’s overtime provisions.65 The defendant contended that the
janitor provided his services as an independent contractor, particularly because he formed his own
cleaning company and provided his services pursuant to an agreement between the parties.66
Applying the economic reality test, the Tenth Circuit acknowledged that some of its factors
supported the janitor’s position, while others favored the trucking company.67 For example, the
court noted that the company, and not the janitor, provided cleaning supplies for the work.68
Ultimately, however, the court determined that the janitor was an independent contractor.69 The
court found that the relationship between the trucking company and the janitor did not involve
employment, but instead resembled a business relationship the company would have with any
other cleaning service.70 The court also acknowledged the janitor’s freedom to determine how he
would accomplish his work.71 Rather than being an employee of the trucking company, the
plaintiff “was in business for himself as a janitor[.]”72

of the test turns on six factors . . .”); Lauritzen, 835 F.2d at 1535.
60 The Fair Lab. Standards Act § 3.III.A.2 (Ellen C. Kearns et al. eds., 3d ed., 2015).
61 Bulaj v. Wilmette Real Est. & Mgmt. Co., LLC, 2010 WL 4237851 (N.D. Ill. 2010).
62 Id. at 10.
63 Id. at 6.
64 Id.
65 Barlow v. C.R. Eng., Inc., 703 F.3d 497, 500 (10th Cir. 2012).
66 Id. at 501.
67 Id. at 506.
68 Id. at 501.
69 Id. at 506.
70 Id. at 507.
71 Id. at 506.
72 Id. at 507.
Congressional Research Service

7

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Finally, how a hiring entity characterizes the individual will not determine a worker’s employee
status. In Scantland v. Jeffry Knight, Inc., a 2013 case involving technicians who installed and
repaired cable, internet, and digital phone services, the U.S. Court of Appeals for the Eleventh
Circuit observed that its inquiry into the working relationship was “not governed by the ‘label’
put on the relationship by the parties or the contract controlling that relationship, but rather
focuses on whether ‘the work done, in its essence, follows the usual path of an employee.’”73
Independent Contractor Rule
Motivated by its belief that the economic reality test has become “less clear and consistent” in its
application, the U.S. Department of Labor (DOL) proposed a new independent contractor rule in
September 2020.74 The rule was intended to be the agency’s sole authoritative interpretation of
independent contractor status under the FLSA.75 Discussing the need for the new rule, DOL
explained:
[T]he [economic reality] test’s underpinning and the process for its application lack focus
and have not always been sufficiently explained by courts or the Department, resulting in
uncertainty among the regulated community. The Department believes that clear
articulation will lead to increased precision and predictability in the economic reality test’s
application, which will in turn benefit workers and businesses and encourage innovation
and flexibility in the economy.76
Like the economic reality test, the new rule describes factors that should be evaluated to
determine whether an individual is properly classified as an employee or individual contractor.77
The rule identifies the following five factors to be considered:
(1) The nature and degree of control over the work;
(2) The individual’s opportunity for profit or loss;
(3) The amount of skill required for the work;
(4) The degree of permanence of the working relationship between the individual and the
potential employer;
(5) Whether the work is part of an integrated unit of production.78
Unlike the economic reality test, however, the new rule characterizes the first two factors—the
nature and degree of control over the work and the individual’s opportunity for profit or loss—as
“core factors” that are the most probative for determining employee status.79 The rule provides
that if both factors point toward the same classification, there is a substantial likelihood that it is
the accurate classification.80 The rule further states: “This is because other factors are less

73 Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir. 2013) (quoting Rutherford Food Corp. v. McComb,
331 U.S. 722, 729 (1947).
74 U.S. Dep’t of Lab., Indep. Contractor Status Under the Fair Lab. Standards Act, 85 Fed. Reg. 60,600, 60,605 (Sept.
25, 2020) (to be codified at 29 C.F.R. pts. 780, 788, & 795).
75 Id. at 60,600-01.
76 Id. at 60,600.
77 Final Rule, 86 Fed. Reg. at 1246-47 (new 29 C.F.R. § 795.105(d)).
78 Id.
79 Id. (new 29 C.F.R. § 795.105(c)).
80 Id.
Congressional Research Service

8

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

probative and, in some cases, may not be probative at all, and thus are highly unlikely, either
individually or collectively, to outweigh the combined probative value of the two core factors.”81
DOL issued a final independent contractor rule in January 2021.82 When the final rule was issued,
DOL maintained that a focus on the two core factors would “improve the certainty and
predictability of the economic reality test[.]”83 However, many viewed the rule as inconsistent
with the economic reality test.84 They argued, for example, that the test requires equal
consideration of all of the various factors.85 Moreover, they feared that emphasizing the two core
factors would narrow the scope of who may be considered an employee.86
In March 2021, the agency proposed withdrawing the rule.87 Among the reasons provided by the
agency was its skepticism that the rule is “fully aligned with the FLSA’s text and purpose” or
case law applying the economic reality test.88 DOL is currently seeking comments on its proposal
to withdraw the rule.89
Notably, by identifying an individual’s opportunity for profit or loss as a core factor, the new rule
would seem to resemble more closely the approach taken by the NLRB for determining employee
status in SuperShuttle. While it may be possible to distinguish entrepreneurial opportunity as a
core factor from the “prism” of entrepreneurial opportunity through which to view other
common-law factors, DOL and the Board both appear to elevate entrepreneurial opportunity as a
consideration for distinguishing between employees and independent contractors.
The “ABC Test”
At least 20 states and the District of Columbia have adopted a multi-part test to determine
whether an individual should be classified as an employee or independent contractor for purposes
of their unemployment compensation programs and/or at least some of their employment laws.90
The so-called “ABC test” presumes that an individual is an employee and not an independent
contractor unless the hiring entity can establish the following three elements:91 (a) the individual
is free from the entity’s control or direction in performing his work, both under a contract for the

81 Id.
82 U.S. Dep’t of Lab., Indep. Contractor Status Under the Fair Lab. Standards Act, 86 Fed. Reg. 1168 (Jan. 7, 2021) (to
be codified at 29 C.F.R. pts. 780, 788, & 795) (hereinafter referred to as “Final Rule”).
83 Id. at 1196.
84 Id. at 1197.
85 Id.
86 Id.
87 U.S. Dep’t of Lab., Indep. Contractor Status Under the Fair Lab. Standards Act; Withdrawal, 86 Fed. Reg. 14,027
(Mar. 12, 2021).
88 Id. at 14,031.
89 Id. at 14,027. The comment period for the withdrawal notice ends on April 12, 2021.
90 While the reasons for adopting the ABC test may vary, at least some states have expressly described an interest in
preventing misclassification for the purpose of avoiding labor and employment law obligations. See, e.g., A.B. 5, § 1(e)
(Cal. 2019) (“It is also the intent of the Legislature in enacting this act to ensure workers who are currently exploited by
being misclassified as independent contractors instead of recognized as employees have the basic rights and protections
they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job,
unemployment insurance, paid sick leave, and paid family leave.”).
91 See Anna Deknatel & Lauren Hoff-Downing, ABC on the Books and in the Courts: An Analysis of Recent
Independent Contractor and Misclassification Statutes, 18 U. PA. J. L. & SOC. CHANGE 53, 65 (2015).
Congressional Research Service

9

link to page 17 link to page 17 link to page 17 Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

performance of such work and in fact;92 (b) the work performed by the individual is outside the
usual course of the entity’s business;93 and (c) the individual is customarily engaged in an
independently established trade, occupation, or business of the same nature as the work
performed for the entity.94 This test has been deemed the “ABC test” because all three elements
must be satisfied before an individual will be classified as an independent contractor.95
The 20 states, as well as the District of Columbia, that have adopted the ABC test through
legislation or judicial decision are identified in the Appendix. The Appendix is organized by
state and three areas where the ABC test has been prescribed: for purposes of a state’s
unemployment compensation program; for purposes of a state’s wage and hour or other
employment laws; and for purposes of a specific industry’s employment standards (e.g., the
construction industry). The Appendix includes excerpts from the relevant statutes, as well as case
descriptions when the use of the ABC test has been judicially prescribed.
By presuming a worker’s status as an employee and placing the burden on the hiring entity to
establish that the individual is an independent contractor, proponents of the ABC test believe that
employers may be less likely to misclassify their workers.96 They also contend that the ABC test
provides greater predictability about employee status because courts and administrative bodies do
not have to weigh a variety of factors, as required by the economic reality and common law
agency tests.97 Critics of the test argue, however, that greater use of the ABC test will likely
discourage businesses from contracting for services or retaining freelance workers.98 These
businesses may be reluctant to accept an employer-employee relationship that does not currently
exist and would require compliance with the various laws that protect employees.99

92 Courts interpreting this element have generally concluded that the hiring entity may exercise control over an
individual even if it does not oversee every aspect of the individual’s responsibilities. See, e.g., Carpet Remnant
Warehouse, Inc. v. N.J. Dep’t of Lab., 593 A.2d 1177, 1185 (N.J. 1991) (“An employer need not control every facet of
a person’s responsibilities, however, for that person to be deemed an employee.”); Dynamex Operations W., Inc. v.
Super. Ct. of L.A. Cnty., 416 P.3d 1, 36 (Cal. 2018) (“[D]epending on the nature of the work and overall arrangement
between the parties, a business need not control the precise manner or details of the work in order to be found to have
maintained the necessary control that an employer ordinarily possesses over its employees, but does not possess over a
genuine independent contractor.”).
93 Courts have generally considered various factors to determine whether an individual’s work is outside the usual
course of the hiring entity’s business. See, e.g., Great N. Constr., Inc. v. Dep’t of Lab., 161 A.3d 1207, 1216 (Vt. 2016)
(“Factors relevant to part B include whether the worker’s business is a ‘key component’ of the putative employer’s
business, how the purported employer defines its own business, which of the parties supplies equipment and materials,
and whether the service the worker provides is necessary to the business of the putative employer or is merely
incidental.”).
94 A court may evaluate various factors to determine whether an individual is customarily engaged in an independently
established trade, occupation, or business of the same nature as the work performed for the hiring entity. See, e.g.,
Kirby of Norwich v. Admin., Unemp. Comp. Act, 176 A.3d 1180, 1188 (Conn. 2018) (“[F]actors that may be relevant
when determining whether part C is satisfied include, but are not limited to, the fact that the putative employee
maintained a home office, that he was independently licensed by the state, that he had business cards, that he sought
similar work from third parties, that he maintained his own liability insurance, and that he advertised his services to
third parties.”).
95 See, e.g., Hargrove v. Sleepy’s, LLC, 106 A.3d 449, 464 (N.J. 2015) (“In order to be classified as an independent
contractor, the retained individual must satisfy all criteria.”).
96 See Marokovits, supra note 8.
97 Id. at 250.
98 See Sean P. Redmond, U.S. Chamber of Com., The PRO Act’s Attack on Indep. Contracting (Mar. 19, 2021),
https://www.uschamber.com/article/the-pro-act-s-attack-independent-contracting.
99 Id.
Congressional Research Service

10

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

The predictability arguably provided by the ABC test was discussed by the New Jersey Supreme
Court when it prescribed the test’s use for purposes of two of the state’s employment laws.100 In
Hargrove v. Sleepy’s, LLC, the Court sought to identify the appropriate test for employee status
determinations for the Wage and Hour Law (WHL), which prescribes a minimum wage and the
availability of overtime pay for hours worked in excess of a 40-hour workweek, and the Wage
Payment Law (WPL), which governs the timing and method of wage payments. Regulations
issued by the New Jersey Department of Labor to implement the WHL incorporated the ABC test
used in the state’s unemployment program.101 However, neither the WPL nor its implementing
regulations similarly prescribed the use of the ABC test for employee status determinations.
After considering the plain language and similar purposes of the WHL and WPL, the Court
concluded that the ABC test should be used to determine an individual’s employee status for
purposes of both laws.102 The Court maintained that there was no good reason for disavowing the
WHL regulations or disregarding the long-standing practice of implementing both statutes in a
similar fashion, noting that “statutes addressing similar concerns should resolve similar issues,
such as the employment status of those seeking the protection of one or both statutes, by the same
standard.”103
In prescribing the use of the ABC test, the Court also observed that the test provides more
predictability for workers, in contrast with the economic reality test.104 Unlike the latter test,
which could “yield a different result from case to case,” the Court determined that the ABC test
would likely identify fewer individuals as independent contractors because each of the three
elements has to be satisfied.105 Accordingly, the Court maintained that “the ‘ABC’ test fosters the
provision of greater income security for workers, which is the express purpose of both the WPL
and WHL.”106
The Court’s interest in adopting a test that yields more predictable results also prompted it to
reject an alternative common law test that encompassed the economic reality test, but focused on
a totality-of-the-circumstances evaluation of the hiring entity’s control over the individual.107 In
criticizing this alternative test, the Court observed that “permitting an employee to know when,
how, and how much he will be paid requires a test designed to yield a more predictable result than
a totality-of-the-circumstances analysis that is by its nature case specific.”108
In Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, the California
Supreme Court also acknowledged the “greater clarity and consistency” provided by the ABC
test.109 In Dynamex, a 2018 case involving delivery drivers for a package and document delivery
company, the Court considered the appropriate employee classification standard for purposes of
California’s wage orders. These orders impose various wage and hour requirements, including

100 Hargrove, 220 N.J. at 464.
101 Id. at 458.
102 Id. at 465.
103 Id. at 463.
104 Id. at 464.
105 Id.
106 Id.
107 Id. at 464-65.
108 Id. at 465.
109 Dynamex Operations W., Inc. v. Super. Ct. of L.A. Cnty., 416 P.3d 1, 40 (Cal. 2018).
Congressional Research Service

11

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

certain mandatory meal and rest periods, for different industries operating in the state.110 After
reviewing the provisions of the applicable transportation order, and considering its objectives and
past judicial interpretations of the state’s wage orders, the Court concluded that the ABC test
should be used to make employee status determinations.111 The Court explained that the ABC test
is faithful to “the fundamental purpose of the wage orders and will provide greater clarity and
consistency, and less opportunity for manipulation, than a test or standard that invariably requires
the consideration and weighing of a significant number of disparate factors on a case-by-case
basis.”112
The ABC Test and Federal Legislation
Although the ABC test is not currently used to determine employee status for purposes of federal
labor and employment laws, legislation that would adopt the test for the NLRA has been
introduced in the 117th Congress. The Protecting the Right to Organize Act of 2021 (H.R. 842/S.
420) would amend the NLRA’s definition for the term “employee” to add the following:
An individual performing any service shall be considered an employee . . . and not an
independent contractor, unless—
(A) the individual is free from control and direction in connection with the performance of
the service, both under the contract for the performance of service and in fact;
(B) the service is performed outside the usual course of the business of the employer; and
(C) the individual is customarily engaged in an independently established trade,
occupation, profession, or business of the same nature as that involved in the service
performed.113
Rep. Bobby Scott, the bill’s House sponsor, contends that the amended definition will “prevent[]
employers from misclassifying employees as independent contractors in order to prevent their
workers from organizing.”114 The revised definition for the term “employee” could expand the
potential pool of workers eligible for unionization. Specifically, by establishing a presumption of
employee status for purposes of the NLRA, it seems possible that the bill’s enactment could
increase union membership in the United States. According to the Bureau of Labor Statistics, the
union membership rate for private-sector employees in 2020 was 6.3 percent.115
The House passed H.R. 842 on March 9, 2021, by a vote of 225-206. If H.R. 842 were enacted, it
may arguably provide the predictability proponents of the ABC test espouse. By amending only

110 See id. at 5.
111 Id. at 40.
112 Id. In 2019, California enacted Assembly Bill No. 5, which codified the ABC test for purposes of the state’s labor
and unemployment insurance codes, as well as the Industrial Welfare Commission’s wage orders. In 2020, the state
enacted Assembly Bill No. 2257, which exempts specified workers, such as musicians and songwriters, from the ABC
test. Employee status for these exempt workers will be determined in accordance with a multifactor test adopted by the
California Supreme Court in S.G. Borello & Sons, Inc. v. Dep’t of Industrial Relations, 769 P.2d 399 (Cal. 1989). See
A.B. 2257, § 2 (Cal. 2020). Adoption of Proposition 22, a 2020 ballot measure in California, also resulted in
application-based ride-share and delivery drivers no longer being subject to the ABC test. Employee status for these
workers will be determined pursuant to an alternative multi-part test that considers, among other factors, whether the
hiring entity unilaterally requires the driver to be logged into its application or platform at specific times of day or for a
minimum number of hours. See Cal. Bus. & Prof. Code § 7451.
113 S. 420, 117th Cong. § 101(b) (2021); H.R. 842, 117th Cong. § 101(b) (2021).
114 Press Release, Hon. Bobby Scott, Scott Urges Passages of the Protecting the Right to Organize Act (Mar. 9, 2021),
https://bobbyscott.house.gov/media-center/press-releases/scott-urges-passage-of-the-protecting-the-right-to-organize-
act.
115 Bureau of Lab. Stat., Union Members—2020 (Jan. 22, 2021), https://www.bls.gov/news.release/pdf/union2.pdf.
Congressional Research Service

12

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

the NLRA, however, the economic reality test and other standards for determining employee
status would continue for other employment laws. Legislation that would have more broadly
adopted the ABC test was introduced during the 116th Congress. The Worker Flexibility and
Small Business Protection Act of 2020 (WFSBPA) (H.R. 8375/S. 4738) would have adopted the
ABC test for purposes of seven labor and employment laws: the NLRA, the FLSA, the
Occupational Safety and Health Act, the Federal Mine Safety and Health Act, the Migrant and
Seasonal Agricultural Worker Protection Act, the Davis-Bacon Act, and the Walsh-Healy Public
Contract Act. To date, the WFSBPA has not been reintroduced in the 117th Congress.
Congressional Research Service

13

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Appendix. State Laws and Judicial Decisions
Providing for Use of ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
Alaska
ALASKA STAT.

§ 23.20.525(a)(8): Defining
covered “employment” for
purposes of the Alaska
Employment Security Act to
include “service performed by
an individual whether or not
the common-law relationship
of master and servant exists,
unless and until it is shown to
the satisfaction of the
department that
(A) the individual has been
and wil continue to be free
from control and direction in
connection with the
performance of the service,
both under the individual’s
contract for the performance
of service and in fact;
(B) the service is performed
either outside the usual
course of the business for
which the service is
performed or is performed
outside of all the places of
business of the enterprise for
which the service is
performed; and
(C) the individual is
customarily engaged in an
independently established
trade, occupation, profession,
or business of the same
nature as that involved in the
service performed[.]”
California
CAL. UN. INS. CODE § 621(b):
CAL. LAB. CODE § 2775(b)(1):

“Any individual providing
“[A] person providing labor or
labor or services for
services for remuneration shall
remuneration has the status
be considered an employee
of an employee rather than an rather than an independent
independent contractor unless contractor unless the hiring
the hiring entity demonstrates entity demonstrates that all of
all of the fol owing conditions: the fol owing conditions are
(1) The individual is free from
satisfied:
control and direction of the
(A) The person is free from
hiring entity in connection
the control and direction of
with the performance of the
the hiring entity in connection
work, both under the
with the performance of the
Congressional Research Service

14

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
contract for the performance
work, both under the contract
of the work and in fact.
for the performance of the
(2) The individual performs
work and in fact.
work that is outside the usual
(B) The person performs work
course of the hiring entity’s
that is outside the usual
business.
course of the hiring entity’s
(3) The individual is
business.
customarily engaged in an
(C) The person is customarily
independently established
engaged in an independently
trade, occupation, or business established trade, occupation,
of the same nature as that
or business of the same nature
involved in the work
as that involved in the work
performed.”
performed.”

The ABC test wil be used to
determine whether workers
are properly classified as
employees or independent
contractors for purposes of
applicable wage orders
(Dynamex Operations W., Inc.
v. Super. Ct. of L.A. Cnty., 416
P.3d 1 (Cal. 2018)).
Connecticut
CONN. GEN. STAT. § 31-
The ABC test used to

222(a)(1)(B): “Service
determine employment status
performed by an individual
for purposes of unemployment
shall be deemed to be
compensation entitlement
employment subject to this
should also be used when
chapter irrespective of
resolving claims involving
whether the common law
unpaid compensation (Tianti,
relationship of master and
ex rel. Gluck v. Wil iam Raveis
servant exists, unless and until Real Estate, Inc., 651 A.2d
it is shown to the satisfaction
1286, 1290 (Conn. 1995)).
of the administrator that (I)
such individual has been and
wil continue to be free from
control and direction in
connection with the
performance of such service,
both under his contract for
the performance of service
and in fact; and (II) such
service is performed either
outside the usual course of
the business for which the
service is performed or is
performed outside of all the
places of business of the
enterprise for which the
service is performed; and (III)
such individual is customarily
engaged in an independently
established trade, occupation,
profession or business of the
same nature as that involved
in the service performed[.]”
Congressional Research Service

15

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
Delaware
DEL. CODE ANN. tit. 19 §

3302(10)(K): Defining the
term “employment” to
include “[n]otwithstanding any
other provisions of this
chapter and irrespective of
whether the common-law
relationship of employer and
employee exists, services
performed by an individual for
wages, unless and until it is
shown to the satisfaction of
the Department that:
(i) Such individual has been
and wil continue to be free
from control and direction in
connection with the
performance of such service,
both under the individual’s
contract for the performance
of services and in fact; and
(i ) Such service is performed
either outside the usual
course of the business for
which the service is
performed or is performed
outside of all the places of
business of the enterprise for
which the service is
performed; and
(i i) Such individual is
customarily engaged in an
independently established
trade, occupation, profession
or business of the same
nature as that involved in the
service performed.”
District of

D.C. CODE § 32-1331.04(c)
Columbia
(construction industry): “An
employer-employee
relationship shall be
presumed to exist when
work is performed by an
individual for remuneration
paid by an employer, unless
to the satisfaction of the
Mayor, the employer
demonstrates that:
(1) The individual is an
exempt person; or
(2)(A) The individual who
performs the work is free
from control and direction
over the performance of
services, subject only to the
Congressional Research Service

16

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
right of the person or entity
for whom services are
provided to specify the
desired result;
(B) The individual is
customarily engaged in an
independently established
trade, occupation, profession,
or business; and
(C) The work is outside of
the usual course of business
of the employer for whom
the work is performed.”
Hawaii
HAW. REV. STAT. § 383-6:

“Services performed by an
individual for wages or under
any contract of hire shall be
deemed to be employment
subject to this chapter
irrespective of whether the
common law relationship of
master and servant exists
unless and until it is shown to
the satisfaction of the
department of labor and
industrial relations that: (1)
The individual has been and
wil continue to be free from
control or direction over the
performance of such service,
both under the individual’s
contract of hire and in fact;
(2) The service is either
outside the usual course of
the business for which the
service is performed or that
the service is performed
outside of all the places of
business of the enterprise for
which the service is
performed; and (3) The
individual is customarily
engaged in an independently
established trade, occupation,
profession, or business of the
same nature as that involved
in the contract of service.”
Il inois
820 ILL. COMP. STAT. 405/212:

820 ILL. COMP. STAT.
“Service performed by an
185/10(b) (construction
individual for an employing
industry): “An individual
unit, whether or not such
performing services for a
individual employs others in
contractor is deemed to be
connection with the
an employee of the
performance of such services,
contractor unless it is shown
shall be deemed to be
that:
employment unless and until it
Congressional Research Service

17

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
is proven in any proceeding
(1) the individual has been
where such issue is involved
and wil continue to be free
that—
from control or direction
A. Such individual has been
over the performance of the
and wil continue to be free
service for the contractor,
from control or direction
both under the individual’s
over the performance of such
contract of service and in
services, both under his
fact;
contract of service and in fact;
(2) the service performed by
and
the individual is outside the
B. Such service is either
usual course of services
outside the usual course of
performed by the contractor;
the business for which such
and
service is performed or that
(3) the individual is engaged in
such service is performed
an independently established
outside of all the places of
trade, occupation, profession
business of the enterprise for
or business; or
which such service is
(4) the individual is deemed a
performed; and
legitimate sole proprietor or
C. Such individual is engaged
partnership under subsection
in an independently
(c) of this Section.”
established trade, occupation,
profession, or business.”
Indiana
IND. CODE § 22-4-8-1(b):

“Services performed by an
individual for remuneration
shall be deemed to be
employment subject to
[Indiana’s unemployment
compensation system]
irrespective of whether the
common-law relationship of
master and servant exists,
unless and until all the
fol owing conditions are
shown to the satisfaction of
the department:
(1) The individual has been
and wil continue to be free
from control and direction in
connection with the
performance of such service,
both under the individual’s
contract of service and in fact.
(2) The service is performed
outside the usual course of
the business for which the
service is performed.
(3) The individual: (A) is
customarily engaged in an
independently established
trade, occupation, profession,
or business of the same
nature as that involved in the
service performed; or (B) is a
Congressional Research Service

18

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
sales agent who receives
remuneration solely upon a
commission basis and who is
the master of the individual’s
own time and effort.”
Louisiana
LA. STAT. ANN. §

23:1472(12)(E): “Services
performed by an individual for
wages or under any contract
of hire, written or oral,
express or implied, shall be
deemed to be employment
subject to [Louisiana’s
unemployment compensation
chapter] unless and until it is
shown to the satisfaction of
the administrator that[:]
(I) such individual has been
and wil continue to be free
from any control or direction
over the performance of such
services both under his
contract and in fact;
(II) such service is either
outside the usual course of
the business for which such
service is performed, or that
such service is performed
outside of all the places of
business of the enterprise for
which such service is
performed; and
(III) such individual is
customarily engaged in an
independently established
trade, occupation, profession
or business[.]”
Maine
ME. STAT. tit. 26, § 1043.11.E:

“Services performed by an
individual for remuneration
are considered to be
employment subject to
[Maine’s unemployment
compensation] chapter unless
it is shown to the satisfaction
of the [Bureau of
Unemployment
Compensation] that the
individual is free from the
essential direction and control
of the employing unit, both
under the individual’s contract
of service and in fact, and the
employing unit proves that
the individual meets all of the
criteria in subparagraph (1)
Congressional Research Service

19

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
and criteria of at least 3
divisions of subparagraph (2).
In order for an individual to
be considered an independent
contractor:
(1) The fol owing criteria must
be met:
(a) The individual has the
essential right to control the
means and progress of the
work except as to final
results;
(b) The individual is
customarily engaged in an
independently established
trade, occupation, profession
or business;
(c) The individual has the
opportunity for profit and loss
as a result of the services
being performed for the other
individual or entity;
(d) The individual hires and
pays the individual’s assistants,
if any, and, to the extent such
assistants are employees,
supervises the details of the
assistants’ work; and
(e) The individual makes the
individual’s services available
to some client or customer
community even if the
individual’s right to do so is
voluntarily not exercised or is
temporarily restricted; and
(2) At least 3 of the fol owing
criteria must be met:
(a) The individual has a
substantive investment in the
facilities, tools, instruments,
materials and knowledge used
by the individual to complete
the work;
(b) The individual is not
required to work exclusively
for the other individual or
entity;
(c) The individual is
responsible for satisfactory
completion of the work and
may be held contractually
responsible for failure to
complete the work;
(d) The parties have a
contract that defines the
Congressional Research Service

20

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
relationship and gives
contractual rights in the event
the contract is terminated by
the other individual or entity
prior to completion of the
work;
(e) Payment to the individual
is based on factors directly
related to the work
performed and not solely on
the amount of time expended
by the individual;
(f) The work is outside the
usual course of business for
which the service is
performed; or
(g) The individual has been
determined to be an
independent contractor by
the federal Internal Revenue
Service.”
Maryland
MD. CODE ANN., LAB. & EMPL. §
MD. CODE ANN., LAB. & EMPL.
8-205(a): “Work that an
§ 3-903(c)(1) (construction
individual performs under any
and landscaping industries):
contract of hire is not
“Except as provided in § 3-
covered employment if the
903.1 of this subtitle, for
Secretary is satisfied that:
purposes of enforcement of
(1) the individual who
this subtitle only, work
performs the work is free
performed by an individual
from control and direction
for remuneration paid by an
over its performance both in
employer shall be presumed
fact and under the contract;
to create an employer-
employee relationship, unless:
(2) the individual customarily
is engaged in an independent
(i) the individual is an exempt
business or occupation of the
person; or
same nature as that involved
(i ) an employer
in the work; and
demonstrates that:
(3) the work is:
1. the individual who
(i) outside of the usual course
performs the work is free
of business of the person for
from control and direction
whom the work is performed;
over its performance both in
or
fact and under the contract;
(i ) performed outside of any
2. the individual customarily is
place of business of the
engaged in an independent
person for whom the work is
business or occupation of the
performed.”
same nature as that involved
in the work; and
3. the work is:
A. outside of the usual course
of business of the person for
whom the work is
performed; or
B. performed outside of any
place of business of the
Congressional Research Service

21

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
person for whom the work is
performed.”
Massachusetts MASS. GEN. LAWS ch. 151A § 2: MASS. GEN. LAWS ch. 149 §

“Service performed by an
148B(a): “For the purpose of
individual, except in such
this chapter [‘Labor and
cases as the context of this
Industries’] and chapter 151
chapter otherwise requires,
[‘Minimum Fair Wages’], an
shall be deemed to be
individual performing any
employment subject to this
service, except as authorized
chapter irrespective of
under this chapter, shall be
whether the common-law
considered to be an employee
relationship of master and
under those chapters unless:—
servant exists, unless and until (1) the individual is free from
it is shown to the satisfaction
control and direction in
of the commissioner that—
connection with the
(a) such individual has been
performance of the service,
and wil continue to be free
both under his contract for
from control and direction in
the performance of service
connection with the
and in fact; and
performance of such services,
(2) the service is performed
both under his contract for
outside the usual course of the
the performance of service
business of the employer; and,
and in fact; and
(3) the individual is customarily
(b) such service is performed
engaged in an independently
either outside the usual
established trade, occupation,
course of the business for
profession or business of the
which the service is
same nature as that involved in
performed or is performed
the service performed.”
outside of all the places of
business of the enterprise for
which the service is
performed; and
(c) such individual is
customarily engaged in an
independently established
trade, occupation, profession
or business of the same
nature as that involved in the
service performed.”
Nebraska
NEB. REV. STAT. § 48-604(5):
NEB. REV. STAT. § 48-1229(1)

“Services performed by an
(Nebraska Wage Payment and
individual for wages, including
Col ection Act): “Services
wages received under a
performed by an individual for
contract of hire, shall be
an employer shall be deemed
deemed to be employment
to be employment, unless it is
unless it is shown to the
shown that
satisfaction of the
(a) such individual has been
commissioner that
and wil continue to be free
(a) such individual has been
from control or direction over
and wil continue to be free
the performance of such
from control or direction
services, both under his or her
over the performance of such
contract of service and in fact,
services, both under his or
(b) such service is either
her contract of service and in
outside the usual course of
fact,
business for which such
Congressional Research Service

22

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
(b) such service is either
service is performed or such
outside the usual course of
service is performed outside
the business for which such
of all the places of business of
service is performed or such
the enterprise for which such
service is performed outside
service is performed, and
of all the places of business of
(c) such individual is
the enterprise for which such
customarily engaged in an
service is performed, and
independently established
(c) such individual is
trade, occupation, profession,
customarily engaged in an
or business.”
independently established
trade, occupation, profession,
or business.”
Nevada
NEV. REV. STAT. § 612.085:

“Services performed by a
person for wages shall be
deemed to be employment
subject to this chapter unless
it is shown to the satisfaction
of the Administrator that:
1. The person has been and
wil continue to be free from
control or direction over the
performance of the services,
both under his or her
contract of service and in fact;
2. The service is either
outside the usual course of
the business for which the
service is performed or that
the service is performed
outside of all the places of
business of the enterprises for
which the service is
performed; and
3. The service is performed in
the course of an
independently established
trade, occupation, profession
or business in which the
person is customarily engaged,
of the same nature as that
involved in the contract of
service.”
New
N.H. REV. STAT. ANN. § 282-

Hampshire
A:9(III): “Services performed
by an individual for wages shall
be deemed to be employment
subject to this chapter unless
and until it is shown to the
satisfaction of the
commissioner of the
department of employment
security that:
Congressional Research Service

23

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
(a) Such individual has been
and wil continue to be free
from control or direction
over the performance of such
services, both under his
contract of service and in fact;
and
(b) Such service is either
outside the usual course of
the business for which such
service is performed or that
such service is performed
outside of all the places of
business of the enterprise for
which such service is
performed; and
(c) Such individual is
customarily engaged in an
independently established
trade, occupation, profession,
or business.”
New Jersey
N.J. REV. STAT. § 43:21-
The ABC test derived from
N.J. REV. STAT. § 34:20-4
19(i)(6): “Services performed
the New Jersey
(classification of construction
by an individual for
Unemployment Compensation employees): “For purposes of
remuneration shall be deemed Act governs the classification
the ‘New Jersey Prevailing
to be employment subject to
of employees and independent
Wage Act,’ P.L.1963, c. 150
this chapter (R.S.43:21-1 et
contractors for both the New
(C.34:11-56.25 et seq.), the
seq.) unless and until it is
Jersey Wage and Hour Law
‘unemployment compensation
shown to the satisfaction of
and the New Jersey Wage
law,’ R.S.43:21-1 et seq., the
the division that:
Payment Law (Hargrove v.
‘Temporary Disability
(A) Such individual has been
Sleepy’s, LLC, 220 N.J. 289,
Benefits Law,’ P.L.1948, c.
and wil continue to be free
316 (N.J. 2015)).
110 (C.43:21-25 et seq.), the
from control or direction
‘New Jersey Gross Income
over the performance of such
Tax Act,’ N.J.S.54A:1-1 et
service, both under his
seq., or other applicable State
contract of service and in fact;
tax laws, P.L.1965, c. 173
and
(C.34:11-4.1 et seq.) and the
‘New Jersey State Wage and
(B) Such service is either
Hour Law,’ P.L.1966, c. 113
outside the usual course of
(C.34:11-56a et seq.),
the business for which such
services performed in the
service is performed, or that
making of improvements to
such service is performed
real property by an individual
outside of all the places of
for remuneration paid by an
business of the enterprise for
employer shall be deemed to
which such service is
be employment unless and
performed; and
until it is shown to the
(C) Such individual is
satisfaction of the
customarily engaged in an
Department of Labor and
independently established
Workforce Development
trade, occupation, profession
that:
or business.”
a. the individual has been and
wil continue to be free from
control or direction over the
performance of that service,
Congressional Research Service

24

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
both under his contract of
service and in fact; and
b. the service is either
outside the usual course of
the business for which the
service is performed, or the
service is performed outside
of all the places of business of
the employer for which the
service is performed; and
c. the individual is customarily
engaged in an independently
established trade, occupation,
profession or business.”
New Mexico
N.M. STAT. ANN. § 51-1-

42(F)(5): Defining the term
“employment” to mean
“services performed by an
individual for an employer for
wages or other remuneration
unless and until it is
established by a
preponderance of evidence
that:
(a) the individual has been and
wil continue to be free from
control or direction over the
performance of the services
both under the individual’s
contract of service and in fact;
(b) the service is either
outside the usual course of
business for which the service
is performed or that such
service is performed outside
of all the places of business of
the enterprise for which such
service is performed; and
(c) the individual is
customarily engaged in an
independently established
trade, occupation, profession
or business of the same
nature as that involved in the
contract of service.”
New York

N.Y. LAB. LAW § 861-c(1)
(presumption of employment
for purposes of New York
State Construction Industry
Fair Play Act): “Any person
performing services for a
contractor shall be classified
as an employee unless the
person is a separate business
entity under subdivision two
Congressional Research Service

25

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
of this section or all of the
fol owing criteria are met, in
which case the person shall
be an independent
contractor:
(a) the individual is free from
control and direction in
performing the job, both
under his or her contract and
in fact;
(b) the service must be
performed outside the usual
course of business for which
the service is performed; and
(c) the individual is
customarily engaged in an
independently established
trade, occupation, profession,
or business that is similar to
the service at issue.”
Vermont
VT. STAT. ANN. tit. 21 §
VT. STAT. ANN. tit. 21 § 341(1):
1301(6)(B): “Services
Defining the term “employee”
performed by an individual for for purposes of wage-payment
wages shall be deemed to be
requirements to mean “a
employment subject to this
person who has entered into
chapter unless and until it is
the employment of an
shown to the satisfaction of
employer, where the employer
the Commissioner that:
is unable to show that:
(i) Such individual has been
(A) the individual has been and
and wil continue to be free
wil continue to be free from
from control or direction
control or direction over the
over the performance of such
performance of such services,
services, both under his or
both under the contract of
her contract of service and in
service and in fact; and
fact; and
(B) the service is either
(i ) Such service is either
outside all the usual course of
outside the usual course of
business for which such
the business for which such
service is performed, or
service is performed, or that
outside all the places of
such service is performed
business of the enterprise for
outside of all the places of
which such service is
business of the enterprise for
performed; and
which such service is
(C) the individual is
performed; and
customarily engaged in an
(i i) Such individual is
independently established
customarily engaged in an
trade, occupation, profession,
independently established
or business.”
trade, occupation, profession,
or business.”
Washington
WASH. REV. CODE §

50.04.140(1): “Services
performed by an individual for
remuneration shall be deemed
to be employment subject to
this title unless and until it is
Congressional Research Service

26

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Unemployment
Wage and Hour/Other
Specific Industry

Compensation
Employment Applications
Applications
shown to the satisfaction of
the commissioner that:
(1)(a) Such individual has been
and wil continue to be free
from control or direction
over the performance of such
service, both under his or her
contract of service and in fact;
and
(b) Such service is either
outside the usual course of
business for which such
service is performed, or that
such service is performed
outside of all the places of
business of the enterprises for
which such service is
performed; and
(c) Such individual is
customarily engaged in an
independently established
trade, occupation, profession,
or business, of the same
nature as that involved in the
contract of service.”
West Virginia
W. VA. CODE § 21A-1A-16(7):

“Services performed by an
individual for wages are
employment subject to this
chapter unless and until it is
shown to the satisfaction of
the commissioner that:
(A) The individual has been
and wil continue to be free
from control or direction
over the performance of the
services, both under his or
her contract of service and in
fact; and
(B) the service is either
outside the usual course of
the business for which the
service is performed or that
such service is performed
outside of all the places of
business of the enterprise for
which such service is
performed; and
(C) the individual
is customarily engaged in an
independently established
trade, occupation, profession
or business[.]”

Congressional Research Service

27

Worker Classification: Employee Status Under the NLRA, the FLSA, and the ABC Test

Author Information

Jon O. Shimabukuro

Legislative Attorney

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R46765 · VERSION 1 · NEW
28

Download PDF

Download EPUB

Revision History

Apr. 20, 2021

HTML · PDF

Metadata

Topic areas

American Law

Report Type: CRS Report

Source: CRSReports.Congress.gov

Raw Metadata: JSON