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An employee is a worker in an employment relationship, but the answer can depend on which law is being applied. Under U.S. federal law, the Department of Labor’s Fair Labor Standards Act (FLSA) analysis and the IRS’s federal employment-tax analysis use different tests. A contract, job title, or Form 1099 does not by itself settle whether someone is an employee.
What “employee” means depends on the legal question
There is no single classification test that decides worker status for every legal purpose. The federal guidance discussed here concerns two different questions: whether a worker is an employee under the FLSA’s wage-and-hour rules, and whether the worker is an employee for federal employment-tax purposes. A classification under one test does not automatically resolve the other. State and local laws may use their own tests.
How the FLSA distinguishes employees from independent contractors
The U.S. Department of Labor’s Wage and Hour Division says the FLSA asks whether a worker is economically dependent on the employer for work or is in business for themself. Its March 2024 Fact Sheet 13 identifies six factors to consider across the entire relationship. No single factor decides the result, and the Department states that no one factor or combination of factors is more important than the others.
- Opportunity for profit or loss: Whether managerial skill can affect the worker’s opportunity for profit or risk of loss.
- Investments: The worker’s investments compared with the employer’s investments.
- Permanence: Whether the relationship is ongoing or more limited in duration or scope.
- Control: The nature and degree of control exercised by the employer.
- Integral work: Whether the work is integral to the employer’s business.
- Skill and initiative: Whether the work calls for specialized skill used with business-like initiative.
These factors are considered together; a single feature, such as flexible hours or specialized skills, does not settle the classification. The Department’s guidance is in Fact Sheet 13.
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A contract or 1099 does not decide FLSA status
For the FLSA analysis, the relationship’s label is not determinative. Calling someone an independent contractor in an agreement or issuing a Form 1099 does not make that person an independent contractor if the economic reality indicates an employment relationship.
How the IRS analyzes federal employment-tax status
For federal employment taxes, the IRS applies common-law rules focused on the degree of control and independence in the relationship. It groups relevant evidence into three categories:
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- Behavioral control: Whether and how the business directs the work.
- Financial control: Whether the business controls financial and business aspects of the worker’s job.
- Type of relationship: How the parties characterize and structure their relationship, including relevant written agreements and benefits.
This is a federal tax analysis, not the FLSA test. If the facts do not make federal tax status clear, the IRS says a worker or business may use Form SS-8 to ask the agency to determine the worker’s status for federal employment taxes and income-tax withholding.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.2024 guidance and the 2026 proposal are not the same thing
The Department of Labor’s March 2024 Fact Sheet 13 describes a six-factor framework for the FLSA economic-reality analysis. Separately, the Department’s 2026 rulemaking FAQ describes a proposal to rescind the 2024 independent-contractor rule and replace it with a five-factor analysis that would treat control and opportunity for profit or loss as core factors. The FAQ describes a proposal, not an effective replacement. Rulemaking status can change, so consult the Department’s current rulemaking page for the latest status rather than assuming the proposal is in force.
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What to check if you are unsure about your own status
- Identify the legal issue. Is your question about FLSA wages and hours, federal employment taxes, or a state or local law? The answer may differ by purpose and jurisdiction.
- Look at the working relationship, not just its label. For the FLSA, consider the six economic-reality factors together. For federal employment taxes, assess behavioral control, financial control, and the type of relationship.
- Use the relevant agency process if needed. For an unresolved federal employment-tax question, the IRS offers Form SS-8. For FLSA questions, consult the Department of Labor’s guidance or seek qualified advice based on the specific facts.
This general explanation cannot determine an individual’s classification without the facts of the work relationship and the applicable law.
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